Learn how to trade Forex ther Australian way!
The Australian Forex market is considered the largest market in the world where more than 5,000 billion dollars are traded daily. In our daily life, we have heard a lot about traders who have made large amounts of fortune after trаdіng the forex market, while we have also heard of other traders who have lost all their wealth. The question arises here, why have some won while others have lost? The answer to this question is simple; because successful traders have a good experience and an excellent knowledge base to help them to work in this market with confidence. Those who lose are those who started trading greedily without having the necessary experience.
Filter Forex Brokers:
Trading is a practical thing that needs to be practised for a period of time to enable the trader to own the necessary experience to be able to start a successful trading. But, what knowledge do we need to have before trading and where can we get it?
- Learn the fundamentals of trading such as the mechanism of working in this market, trading platforms used in addition to the aspect of the manner of opening, closing and controlling transactions.
- Learn about the methods of analysis used to predict the movement of prices and all the techniques that are used.
- Develop the appropriate trading strategy before the start of trading and then test it through the demo account to ensure its effectiveness before moving to the real account.
Risks in Forex Trading
The Forex market, like other markets, contains a range of risks that may cause loss of the capital invested. So, it is necessary to learn about these risks to know how to avoid them, these risks can be summarised as follows:
Risk of Leverage:
Leverage can be defined as the use of additional funds borrowed by Forex brokers to execute transactions in larger amounts of money. The leverage has a positive side of increasing the profit rate for the one who can use it correctly and another negative side that may destroy the account if it is used unreasonably without calculating the risks and the possibility of market volatility.
Interest Rate Risks
Countries’ exchange rates have been affected by the interest rates. If a country’s interest rates rise, its currency will strengthen due to a flow of investments in that country’s assets claimed because a stronger currency provides higher returns. On the other hand, if interest rates fall, its currency will weaken as investors begin to withdraw their investments. Due to the nature of the interest rate and its effect on exchange rates, the differences between currency values can cause Forex prices to dramatically change.
The counterparty risk in Forex market comes from the solvency of the market maker. During changeable market conditions, the counterparty may be unable or refuse to abide by contracts.
The psychological factor is one of the most important factors governing the traders. When traders are in a good psychological state, they can make a good trading decision. Unlike traders who are in a bad psychological state, they become unable to trade with confidence and may make wrong and destructive decisions at the same time. Resulting in the entire account being lost.
Forex markets are heavily affected by large-scale political and economic events that may cause huge fluctuations, leading to heavy losses. For example, when Britain emerged from the European Union, traders lost in one-hour tens of billions of dollars.
How to manage the risk?
Successful traders can avoid previous risks in the first place if they are aware of them and their negative results as follows:
- Not to risk full capital in a single transaction or one pair of currency pairs, be careful to diversify and use no more than 10% – 20% of the capital.
- Use a leverage not exceeding five times the capital and comply with stop-loss orders
- Stay away from trading in a bad mood and do not open any transactions especially in times of loss.
- Not to enter into any deals at the time of major political and economic events that could cause unexpected fluctuations.
Pros of Online Trading
Online trading provides traders with many advantages that make it one of the fastest growing markets where traders can make their own decisions, unlike stockbrokers who have a clear impact on traders and their decisions. The main advantages of online trading can be summarised as follows:
Forex trading can have very low costs when it comes to brokerage and commissions. The main commission charged by brokerage companies is mainly the spread, which is often small and very suitable for traders. The traders pay low-cost start from one pip or less than that sometimes. Forex brokers offer accounts of fixed spread and others with variable spread to meet all the trader’s needs.
The Forex market contains the largest number of market participants compared with any other financial markets, this helps to achieve the highest level of liquidity, which means even large orders of currency trades are easily done efficiently without any large price deviations.
Forex market is among the most accessible markets for individual traders. The Forex market opens 24 hours a day/5 days per week, meaning Forex trading fits more easily into traders’ schedules than some other types of trading.
How to analyse the global market?
There are two methods, which are used to predict the rise or fall of the currencies; fundamental analysis and technical analysis. The fundamental analysis is the one that predicts the exchange rate of a currency through the economic situation of the state.
For instance, when the economic situation for the country is good, the price of its currency rises and vice versa. Today, the brokerage companies offer what is known as the “economic calendar”, which shows all the economic indicators that relate to the economic situation in the country, which probably leave an effect on the exchange rate of its currency.
Technical analysis is the one by which we predict the currencies prices based on the chart and by studying the currency’s history, so we can predict its future movements. Over the years, numerous technical indicators have been developed by analysts in attempts to accurately forecast future price movements.
Some indicators are focused primarily on identifying the current market trend, including support and resistance areas, while others are focused on determining the strength of a trend and the likelihood of its continuation.
Capitalise from the market movements
Forex traders rely mainly on market movements, and use various methods of analysis to determine a direction, and this is the cornerstone of trading. In the financial markets, there is a direction and correction, and the trend is the movement of the market now.
If the chart formed higher tops and lower bottoms, this means that we are in front of the upward trend, in this case, rising movement is stronger than declining. The declining in such case is considered as a correction. If traders can determine the exact direction of the trend, they will have full confidence in executing successful transactions without fear or hesitation, and can make a lot of profit, taking advantage of movement in the direction of the market and the correction.
The most important problems faced by traders is that they chase the direction and try to ride with all opportunities, which lead them to many problems and causes them great losses. Such traders believe that the opportunity is not coming back; on this basis, they open many transactions without any clear vision to produce good results.
Their goal is not to keep the account without any open transaction, and this is contrary to the nature of work in the financial markets, which need a clear vision and in-depth study before opening any transaction. Knowing that every day there are many opportunities that can be exploited. It is wrong to say that there is a missed opportunity.
In short, the successful trader is the one who has patience, and waits until the opportunity ripens and the direction becomes clear according to the data of the markets, and then opens the right deals to achieve excellent results. On the other hand, trying to chase the markets is a kind of uncalculated gambling with disastrous consequences.
Taking advantage of market movements is based on data from the types of technical and fundamental analysis that we talked about previously.
The difference between Forex and equities trading
The mechanism of trading in the Forex market and equity markets are very similar in terms of the laws of supply and demand, in addition to the forces and variables that govern these markets, but there are many major differences between them as follows:
- Australian Forex markets operate 24 hours a day for five days a week while equity markets operate for a certain number of hours during the day, giving Forex traders more flexibility.
- In Australian equity markets, there are many collapses that can lead to big losses, but not in the Forex markets as the currency of a country can’t lose its value all at once.
- The Australian Forex market is the largest in the world and the highest in terms of liquidity, allowing the possibility of executing transactions and closing them at any time, unlike the equity market where there are periods of quiet trading in which it is difficult to execute orders.
- In Australian Forex markets, traders can use high leverage while this advantage is not available in equity markets.
, if it would be easy to make a profit, then everyone would be wealthy and rich. It is however true that online trading has provided many traders with a reliable source of income and profits. However, it cannot be so unless it is properly dealt with by building a good knowledge base, and owning the real experience needed to start trading, away from risky adventure and greed.