How to invest in FOREX and Commodities 2019.
Trading in foreign exchange currency (forex) can be a good business venture for those who are serious with their investment journey. The forex currency market is the single largest liquid asset market accounting for over $5.3 trillion dollars in daily trading volume. To put it in perspective, forex trading volume represents 4x the global GDP.
Below are some of the steps that will guide new beginners in the journey of investing and trading in foreign currencies and commodities.
Learn the basics.
Before getting into the jist of tradiing forex, you have to learn the basics to gauge whether trading forex is something you would like to pursue. Education is key considering that as a new entrant in trading, there are a lot of forex jargons that often seem to intimidate new traders. To help in solving the forex and commodities mystery, some of the most basic terms include:
A pip: stands for point in percentage, is a very small measure of change in a currency pair in the forex market.
Spread: represents the difference between the BID and the ASK price in the market quotes. The ASK price is applicable to a BUY order and the BID price is applicable to a SELL order.
Leverage: represents the ability to control a large amount of money by giving the trader the ability to make meaningful profits on the normally small daily currency movements while risking only minimal capital on a given position. Leverage can exponentially increase your profits as well as your losses so it is crucial one understands how to use leverage properly.
Margin is the term given to the amount of money required in your account in order to open a trade. As a suggestion, you can watch the movie: margin call to get better at this concept.
Expert Advisor (EA); represents computer programs developed to open trades on behalf of investors on the MetaTrader 4 platform. Expert Advisors rely on various technical indicators to provide signals for entry and exit of trades.
To venture into learning the basics of forex’ education, a good place to start with free materials would be:
Opening a brokers account.
Participating in forex and commodities trading requires access to Central banks and this is not easily accessible for retail purchases. A broker represents the go between for access to asset prices that can be readily exchanged in the global market place.
A broker provides trading services at a fee usually represented as a spread cost. Below are some of the most important factors to keep in mind when choosing the best online forex brokerage for currency trading.
- Regulation: Not all regulatory jurisdictions and licenses are created equal for international forex and CFD Brokers. Investors should know which country their broker is based in and which country’s laws apply to their account. To avoid fraud, it is critical to use a broker that is well-known and well-regulated.
- Range of Markets Offered: It’s always important to determine which markets or individual trading products (currency pair or stock symbol) you want to trade, then check to make sure they are offered. Also check to make sure the products you want to trade are available in your region.
- FX Trading Tools & Platforms: Which platforms and trading tools are available for the products you are considering? Are compatible with your web browser, computer operating system, or mobile smartphone, or any other devices you are planning to use for trading?.
- Order Execution: Available execution methods can depend on whether the broker is a principal dealer acting as a market-maker, and/or if they are an agency-only broker relying on third-party dealers (liquidity providers). Other execution methods, policies, conditions, or available order types can vary (including premium or free trade protection tools such as guaranteed stop-loss orders, fill-or-kill or fill within a maximum deviation range) can vary from broker to broker.
- Customer Service: Customer service is important. The scope and quality of support can be a major differentiator across online FX brokerages, ranging from the speed and overall quality of assistance to the availability across global trading hours and international markets. See section, “Customer Service” below.
Develop a strategy.
While being new to investing can be intimidating, learning the ins and outs of investing in FX and commodities will help in building your confidence and overall profitability.
A strategy represents the market approach that one uses to navigate the complexities of the market by having an approach that fills the knowledge gaps of what the market is likely going to do. FX and commodities markets are driven by various factors and as a retail investor, one cannot trade the same way as big institutional investors do.
A retail investors approach should be simple and easy to evaluate and involves constant testing and re-evaluation. Common methods used to analyze the markets include:
- Technical analysis: Technical analysis involves reviewing charts or historical data to predict how the currency will move based on past events. You can usually obtain charts from your broker or use a popular platform like Metatrader 4.
- Fundamental analysis: This type of analysis involves looking at a country’s economic fundamentals and using this information to influence your trading decisions. Some websites offer excellent news that can be used to inform your decisions.
- Sentiment analysis: This kind of analysis is largely subjective. Essentially you try to analyze the mood of the market to figure out if it’s “bearish” or “bullish.” While you can’t always put your finger on market sentiment, you can often make a good guess that can influence your trade decisions.
Knowing the best way to analyze the markets will be informed by your trading personality but luckily, resources are available for getting to know the best way to trade.
Sites that give the best free education include:
www.babypips.com: Offers free education materials, quizzes to test knowledge and a track record to capture ones progress.
www.dailyfx.com: Offers deeper education into trading FX in their DailyFX university.
www.promtaji.com: Offers strategies to enhance trading skills and is best suited for those looking for market mentors to increase their understanding of the markets.
Extras to consider
Social trading is a form of investing that allows investors to observe the trading behavior of their peers and expert traders and to follow their investment strategies using copy trading or mirror trading.
While being a trader is a lonesome journey, the rewards can be enormous and social trading helps in smoothing out a traders grounding in their trading skills and knowledge. Social trading will help in your overall trading and market view by accessing other peoples views of the market.
It is important for one not to jump in into social trading tendencies which involve copying other peoples strategies without adequate knowledge of their own psychology and trading philosophy. Social trading should be used as a reference for sentiment and not be your main strategy.
Some of the best social trading sites include: