Forex has become one of the important investment tools in recent years. Forex, which is very profitable when the right applications are made, also contains many risks when invested without sufficient information. The way to be successful is to benefit from good economic knowledge and expert advice. If you are planning to become a forex trader, or already are one, these tips will help you become far more successful at it. Let’s get started.
12 Forex Tips
1. Learn about forex by doing your research
It is of great importance to obtain detailed information about this market before investing in Forex. In short, Forex, which is an international foreign exchange market and derived from the words “Foreign Exchange”, is the world’s largest and most developed derivatives market. In Forex, which is defined as a global market where foreign exchange is traded by taking advantage of the difference between the currency of one country and the currency of another country, investments are made with other instruments besides foreign exchange. Forex is also defined as Over the Counter (OTC) and gathers non-physical buying and selling transactions under a single roof.
In the Forex market, money is made from the price difference in buying and selling transactions, just like in a foreign exchange office. You make a profit by buying the product at a lower price and selling it when the price rises.
Leverage rates, bidirectional transactions, fast positioning and the “stop loss” feature, which allows to stop the risk, are shown as prominent advantages in the Forex market. There are different leverage applications around the world in Forex. While up to 1 to 10 ratio is allowed in our country, high ratios such as 1 to 100 were used in the past.
Forex was brought into compliance with legal regulations in many countries recently, but when we look at its history, we can say that it is a very old market, although not as much as the stock market. With the amendments to the law, investors were prevented from being victims.
Forex transactions are made through intermediary institutions, over internet-connected devices. Regardless of where they are in the world, investors have the opportunity to evaluate their savings under equal opportunities and equal prices. Equality of opportunity leads to the popularization of Forex and the increase in the number of participants.
Forex brings all the investors in the world under one roof. Transactions can be made 24 hours a day, 5 days a week. The market, which opens at midnight on Sunday, closes at midnight on Friday, and while one country’s market closes due to the time difference due to geographical location, another opens, thus keeping the market open for 24 hours.
2. Choose the right forex broker
To invest in the Forex markets, you must make the right start. The most important step is to choose the right brokerage firm after you have done the necessary research and developed yourself and received the necessary training.
When choosing a brokerage firm, you should first consider whether the institution is a legally operating Forex brokerage firm. Then you should thoroughly examine the services it offers, its analysis support and technical infrastructure competencies. You should talk in detail with the customer representative assigned to you and ask all the questions in your mind.
If you want to use leverage in forex transactions, the brokerage house you will choose must have a “Leveraged Buy – Sell Certificate”. You cannot make leveraged transactions through an intermediary institution that does not have this document.
After choosing the brokerage firm that you think is the best for you, you can open an investment account and start your Forex trading.
After the regulations brought to the Forex market in most countries, foreign brokerage houses have started to enter the market quickly. Regardless of the regulations, the people who reach you from these companies that offer gifts, bonuses, high leverage ratios and low collateral, either disappear after opening an account or start not to contact you.
In this process, many investors suffered. In many countries, it is forbidden to make Forex transactions through foreign companies that do not have permission. For this reason, it is very dangerous to trade with foreign companies that give gifts and bonuses as high as 500 – 3,000 for 1 leverage.
3. Beware of leveraged trades
When trading with leverage in Forex, keep in mind that the higher the leverage, the higher the risk. Entering high leverage with excessive winning speed is risky.
Leverage system, which turns Forex into an attractive investment area, allows you to increase your earnings. As we have mentioned before, the leverage system is implemented as 1 to 10. This means that you increase your profit rate 10 times when you make a transaction. In short, you can deposit $100 and earn $1,000.
You should take care to open and close positions for the hours you are awake and prefer short-term intraday trading strategies. We recommend that you stay away from leverage if you do not have experience, as the risks are high.
Account types with low leverage ratio are shown as the most ideal account types in Forex. After solving the logic of leverage and increasing your self-confidence, you can switch to standard account types.
4. Limit your risk
It is possible to limit the risk of loss in the Forex market. You can control your position with “Stop loss” / “Take profit” orders. What you need to do is to determine the take profit and stop loss ratios according to a certain level. When you do this, the system will automatically terminate your process even if you are not at the computer, so you can limit your risks.
We strongly recommend that you enter the levels of “Stop loss”, “Take profit” orders in each of your Forex trades. In particular, do not change your “Stop loss” level except in special circumstances. In order to protect your investments, you need to set aside the psychology of not being able to close in loss.
Trading in Forex with low amounts and high lots increases the risk. When you trade high amounts with low lots, your earnings may not satisfy you. For this reason, you must maintain a certain balance when trading.
5. Learn what to buy and sell in forex
There is a wide spectrum to invest in Forex, which is a worldwide market. Currencies of all countries of the world, the world’s most important and largest stocks, stock market indices and tradable commodities are traded in the Forex market.
Currencies traded in pairs in the market are called “parity”. The parity shows the value of one country’s currency against another country’s currency. For example, the value of the Euro against the dollar is defined by the EUR/USD parity.
In the Forex market, commodities are divided into subgroups such as industrial metals, minerals, chemicals, agricultural and energy products, and foodstuffs. Among the most traded commodities are commercial goods such as petroleum, aluminum, silver, copper, gold, platinum, corn, wheat, cotton and coffee.
Stocks of famous brands such as Google, Microsoft, Apple, Ferrari are also traded in the market. The world’s largest stock market indices such as Dow Jones, S&P500, CAC 40, Dax 30, FTSE 100, Stoxx 600 are also among the areas where they can invest. You can easily invest in stocks on these exchanges with contracts for difference called CFDs.
6. Forex market is not a playground
You can see this market as a game because you trade Forex on a computer or any device connected to the internet. However, you should never forget that every transaction you make is a risk for you. Therefore, you should never forget that Forex is not a gamble, but an investment market that you need to work on and take seriously.
7. Use forex tutorials
The way to be successful in the Forex market is to train yourself in this field in the best way. Brokerage houses provide free training to address investors’ lack of knowledge and experience. For the training sets prepared by these institutions, it is sufficient to visit the websites of the institutions and fill in a form.
The training sets include e-books, videos, webinars and demo accounts. E-books are a good resource to learn the basics. The videos are prepared by the experts of educational institutions and are intended for you to learn the logic of Forex. Webinars are seminars held online. By participating in these seminars, you can ask your questions to the experts in live broadcasts. It is possible to find numerous articles on the Internet where you can get more detailed information about Forex.
8. Learn forex with demo accounts
Before trading in the Forex market, you must have experience with demo accounts. With the legal regulations in your country, brokerage houses are required to provide demo accounts to investors and you must take at least 50 positions on the demo account for a minimum of 6 days before starting real transactions.
With these accounts, you can make transactions with virtual money under real market conditions. So you can learn to develop strategies and reduce risks. With your demo account loaded with 100 thousand dollars of virtual money, you can buy and sell just like in the real Forex market.
In the demo account, you will learn how to trade in different market conditions without risk. You can develop your own trading strategies and learn how to avoid risks.
9. Learn bidirectional investment processes
It is possible to earn profits when prices in the market rise or fall, thanks to bidirectional investment transactions in Forex. Since investment instruments are traded in pairs, you can profit from every price movement.
E.g; In Forex, gold is traded in US dollars. Its display as parity is XAU/USD. If gold prices are in an upward trend, naturally, it is necessary to buy gold and sell dollars. When gold prices fall, you should buy dollars by selling gold. If you want to trade in Forex, you do not need to have gold. Such situations are called “short sales”.
Thus, you can create a sales position with an investment instrument whose price will decrease thanks to two-way transactions, even though you do not have it. In this way, when your expectation comes true, you will still make a profit.
10. Follow the market well
To be successful in Forex, it is necessary to follow the market in the best way. So you can predict price changes in advance. Due to the nature of the Forex market, sudden changes in prices can be experienced. For this, you should know and follow the factors that change the prices of the investment instruments you are interested in. In this way, you may be able to predict the change in prices in advance.
11. Learn how prices are set
All banks in the world have their own unique cash flow for each currency. Banks with a large amount of foreign currency inflows and outflows have to regulate their cash flows to meet their own and their customers’ needs. For this reason, banks want to buy the foreign currency they need by selling their excess currency. Apart from currency pairs, banks also have various commodities such as gold and silver. Because, just like individual investors, they want to increase their profitability by operating in the market. These banks provide market prices in Forex markets. It is transferred to Forex brokerage houses through companies such as Reuters, Bloomberg, Currenex, Hotspot FX, Flextrade in the network called Forex Price Network.
12. Leverage analytics
In the Forex market, analysis is as important as market monitoring. To invest, you must know how to analyze. With analysis, you can determine the support and resistance levels of investment instruments. Forex analysis provides you convenience while detecting risks. Incorrect analyses often result in unsuccessful transactions. While making a stable profit is possible with a successful analysis, the right analysis increases the value of your investments.
So those were 12 terrific tips to help take your forex trading to new levels. We hope that you find them useful. Good luck!