Currency trading provides a home to millions of forex traders worldwide. The $6 trillion daily liquidity attracts many investors who trade using designated risk management and strategies. The world of finance is quite tricky for new traders who can get lost while trying to find the right stuff for themselves. Our article will highlight the crucial points of forex trading and see if traders should opt for this in their portfolios.

How can you trade Currencies?

Forex trading is simple and can be accomplished within the following steps:

1. Setting up an account. Traders have to select a good trading broker. It is wise to choose amongst those that are regulated by top-tier authorities. Financial Conduct Authority, Australian Securities and Investment Commission, etc., are a few better regulators that we can mention.
2. Verification. Brokers require traders to verify their identity by providing their identification documents.
3. Funding and trading. It is possible to put cash in your account through multiple options that brokers offer. Cryptocurrencies, bank transfers, credit cards, etc., are a few ways to achieve this. After the cash is made available in your account, you can start trading. Investors can also demo trade currencies using a virtual portfolio that uses fake money and real-time market conditions.

Characteristics of Forex Trading

Trading on currencies can prove to be hard if traders do not know how the market operates and its essential characteristics. Let us cover some of them in detail.

Price movement

The supply and demand of currencies can increase or decrease that causes the price to go up and down. Varying economic factors such as inflation rate, interest rate, bank statements, political instability can cause a pair to move extensively.

Volatility and liquidity

The up and down movement of the currencies refers to the volatility. This is the bread and butter for traders as abundance in the factor means that more opportunities are available to capitalize on. Liquidity refers to the trading volume and is vital for traders looking to enter the market with quickness and ease.

Market hours

Forex market is available 24/5 for traders from 5 p.m. EST on Sunday until 4 p.m. EST on Friday. During these hours, it is possible to buy and sell desirable currencies and use the respective strategies.

Forex Strategies

Forex strategies are vital to trader the markets with a proper approach and are profitable in the end. Traders are seen utilizing indicators and other fundamental factors to predict the outcome of the currency pairs. Let us observe an example where a trader uses price action to predict the result of a trade.

Image 1. A trader plots a resistance line on the 4-hour chart on CADJPY. He finds out that the market is making bearish candles and decides to take a short position. He also plots Fibonacci intervals and places his first take profit on the 38.2% retracement level. This gives him a good risk-reward ratio.

Few Trading Tips

We can list a few good trading tips as follows:

• Risk. Risk is one of the important factors in trading. It depends on the trader if they want to put 1% or more of their capital on the line. Professionals recommend putting no more than 5% of the portfolio on a single trade. Risking more can result in the complete liquidation of the account in a few positions.
• Psychology. Traders have to maintain a good mindset while trading. The emotions such as greed, fear, and happiness should be in check at all times.

At the end of the day, it is the job of a trader to keep all things in check for their trading.