Forex (currency exchange market) is one of the largest trading platforms, highly volatile because of the continuous ups and downs of the price. People are joining this platform to earn money and to be independent. Their deposition and transaction take place in the form of the USD. The basic mechanism in this trading platform is to deal with a specific currency pair.
A trader has to buy one currency pair, retain it for a specific period, and then sell it based on the movement. The currency pair can be EUR/USD, AUD/NZD, GBP/USD, USD/CAD, and so on. The first one in a pair is called the base currency, while the second one is quoted currency.
The Forex industry can be beneficial for the investors in several ways, and due to the liquidity, anybody can buy and sell the currencies whenever he wants.
How can the CFD platform be advantageous to the traders?
It can be beneficial for investors because they can take advantage of this industry. By combining the analysis and choosing a good trading style, one can quickly develop his analyzing capacity. For this, every beginner should realize these fundamental pillars of the trades –
1. Fundamental analysis
Fundamental analysis is considered a pillar to predict the upcoming condition of the chart. For the long-term traders or the people who prefer trading in a higher timeframe, this analysis is a must for them. Fundamental analysis means – you have to analyze the news or political events that can affect the economic performance of a country, the GDPs, inflation and interest rate, currency price, unemployment rate, etc. These events will let a newbie to guess the movement of the graph, and he can easily find out the ideal exit or entry point. Remember the fact, to buy shares online you must be extremely skilled in fundamental analysis. Otherwise, be ready to lose money.
2. Technical analysis
Price charts reveal a lot of stories that the newbies need to predict the approaching direction. Experts have made several indicators to analyze the resistance and support level and draw a trendline to identify the market. Let us make it clearer. Resistance and support levels are the basic terms in this market. Moving average, moving average convergence and divergence, momentum, triangular moving average are some of the best indicators, which use the trendline, resistance and support spot to figure out the flow of the graph. A rookie can perfectly identify the entry and exit point to make money.
3. Money management
In the Forex world, money management is also known as risk management. It will teach an investor to calculate the risk to reward ratio before jumping in a trade. In addition, every beginner should include the risk management plans in his trading strategy to avoid possible financial losses from a market crash. The plan will prevent you from choosing a bigger lot size, which can multiply the losses during a downtrend. This is advantageous for both short-term and long-term traders. Investors trading with shorter timeframes must set the stop-loss and take-profit limit to minimize the losses because these people use a 15-minute or 1-hour chart for their business.
Benefits of Forex trading
- The platform is the greatest online financial market. According to the statistical data, every day, approximately $4 or $5 trillion is being traded here.
- People can quickly enter into this business if they have devices and internet access. Besides, you don’t need thousands of money to start the business.
- Liquidity is another benefit that the beginners will get in this industry. Because of it, they can enter the trades whenever they want.
- The transaction cost of this market is extremely low, and you will need to pay the broker small commission fees while entering into trades.
These are the benefits of the FX industry. Anybody can enter this industry if he has a device and internet access. Because of these reasons, the platform industry can be advantageous for beginners.