By now you should know that as a Forex Trader you need to have a unique style and approach when buying and selling Forex. The reason is that with forex there is no single way to trade in the largest and most liquid market. Thus, the ability to know when to buy and sell Forex is dependent on a lot of things. Truthfully, there are often a lot of volumes when the market is volatile because of the high risks involved. To boost your trading experience, this article will throw light on the concept of buying and selling currency.
What does it mean to buy and sell Forex?
Simply put, whenever you buy and sell Forex, you are estimating the appreciation/depreciation in the value of one currency against the other one. The foundation of the trade you’ll be using will incorporate fundamental and technical analysis. While you keep the risk management processes in mind, you’ll use certain key levels of entry and exit too.
read also: Should you trade forex or stock?
What factors affect currency pairs?
Political events such as Government instability, corruption as well as changes in government often affect the value of one currency over the other.
Also, economic policies make traders buy and sell certain currency pairs. So, as a trader, you will be keeping an eye on unemployment figures, GDP, monetary and fiscal policies, etc. These factors have a big influence on the values of certain currency pairs.
Lastly, you should also be fully grounded in your technical analysis. Certain key price levels will be of necessity to you. The basis of your trades should be obtained from the support & resistance levels, trends, and other indicators.
How do you buy and sell EUR/USD?
Using the EUR/USD to explain how you can buy and sell certain currency pairs will be helpful. If you plan on buying the EUR/USD to make a profit. Then, you can calculate that the EUR will go up in value relative to the USD. When the trade is sold you can make a profit depending on commission, fees, and of course other factors discussed above.
At this point, you will be buying the EUR while selling the USD at the same time. Now, if you bought the EUR/USD pair at 2034 and the pair moved up to 2534 at the time the trade was closed/exited. You have made a profit of 500pips on the trade.
How the technical perspective will be utilized
After reading how a profit is made off a trade above, you might think, oh, Forex trading is easy as pie. But hold up a minute, there are lots of factors that are utilized in different trades including the one explained above. An entry and exit level is utilized, and it’s will be substantiated by the use of the RSI indicator. Similarly, before that trade let’s say, USD/JPY currency pair, you need to follow political and economic news. Therefore, you should never underestimate the essence of styles, approach, and strategy when you buy and sell Forex.
Understand risk management before you buy and sell Forex
Longevity is important when you buy and sell currency pairs thus you need to learn and understand risk management. Understanding a potential swing in market volatility along with the risk/reward ratio is of the essence. Since the factors that affect currency pairs are immense and are liable to make significant impacts on trades. Then you ought to avoid those adverse effects by implementing proper risk management techniques in your trades.
To buy and sell forex can be very complex, therefore you must understand the mechanics behind it. Take certain actions like knowing how to read currency pairs before initiating a trade. Again, study recommended forex guide for beginners to get a foot in the door on the basics of forex trading.