Forex Tips. What You Need To Know Before Trading

Updated: Nov 30, 2019


Before you start to trade forex, it is important to have an understanding of the market, what can move its price and the risks involved in FX trading. Here are a few tips to get you started:


Take the time to research the forex market

Learn about the factors that influence currency prices

Make sure you understand the risks


" The forex market is spread across four major trading centres: London, New York, Sydney and Tokyo. This means that the market trades 24 hours a day. "

Take the time to research the forex market


It is important to research the forex market before you open a position as the market works in a different way to the majority of financial markets.


Forex is bought and sold via a network of banks, rather than on a centralized exchange. This is called an over-the-counter (OTC) market. The banks act as market makers – offering a bid price to buy a particular currency pair, and a quote price to sell a forex pair.


The forex market is spread across four major trading centres: London, New York, Sydney and Tokyo. This means that the market trades 24 hours a day.


Learn about the factors that influence currency prices


Making predictions about the future price of currency pairs can be difficult as there are many factors that could cause the market price to fluctuate.


Like most financial markets, forex is primarily driven by the forces of supply and demand, but there are some other factors to bear in mind:


Central banks. Decisions made by central banks can impact the supply of a currency, so any announcements tend to be followed by fluctuations in the market


News reports. Positive news can encourage investment in a specific currency, while negative news can decrease demand


Market sentiment. The mood and opinion of traders can play a major role in currency price movements, and often cause other traders to follow suit


Make sure you understand the risks


Although the forex market presents a wide range of opportunities, it is important to understand the risks that are associated with it.


The forex market is extremely volatile, due to the large volume of traders and the number of factors that can move the price of a currency pair.


Traders should always be mindful of political, economical and social events that can cause fluctuations of a pair’s price and create a risk management strategy to avoid unnecessary losses.

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Trading in leveraged currency contracts comes with substantial risk. You must be aware of these risks before opening an account to trade. High leverage amplifies gains as well as losses, leading to potential loss of the entire account balance. Trading in leveraged currency contracts may not be suitable for every investor. Never speculate using money that you cannot afford to lose.

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