“Every battle is won or lost before it’s ever fought” – Sun Tzu
Trading profitably on the Foreign Exchange (Forex) Market requires skill, knowledge, and experience. It is like any other skill that needs to be learned: Practice makes perfect. Therefore, to trade profitably, it is essential to develop the skills through the study and practice of the art and science of Forex trading.
Here are some pointers to guide you in the right direction:
Online Trading Broker
It is essential to partner with a genuine, professional online trading broker like Jones Mutual. Otherwise, you will have no chance of placing profitable trades. The global increase in Internet connectivity and access has led to the rise in online trading brokers, both fraudulent and legitimate. Therefore, the question that begs is how do you distinguish between a bona fide and a scam broker?
Fortunately, there are a few simple tests (and things to look at) when deciding which Forex broker to partner with. These aspects include the following:
- Website usability and user interface,
- Clarity of website content,
- Prominence of the governance and risk disclaimer,
- Comprehensive education centre including training materials for all trading levels,
- Attentive, competent customer service centre,
- Clearly-stated Know Your Customer (KYC) procedures and the collection of KYC documentation to ensure that clients are not terrorist organisations or money launderers,
- Powerful online trading platform with up-to-date pricing and accurate technical analytical tools like charts, graphs, and oscillators.
As the quotation mentioned above by Sun Tzu infers, the essential part of any battle is the initial planning. In other words, army generals draw up strategies and plans so that their troops know what manoeuvres to execute to win the fight. If there are no planned strategies, the army will not win the war.
So too, trading strategies should be planned and executed according to the plan. Otherwise, you run the risk of placing losing trades; thus, running the risk of losing your total investment.
At this point, it’s vital to note that Contracts for Difference (CFDs) are a useful tool to utilise to profit on small, volatile price movements of a linked (or underlying) asset. Secondly, a CFD is a leveraged trading instrument. It allows a trader to trade on margin.
In other words, the investor does not have to purchase large numbers of the underlying asset such as stocks, bonds, commodities, cryptocurrencies, or Forex. The broker enters into a contract with the trader allowing the trader to profit from the price movements of the linked asset without having to purchase large percentages of the stated asset.
Succinctly stated, there are three trading strategy types: short-, medium-, and long-term trading. The strategy that you choose is dependent on your desired outcome.
Should you wish to profit from an asset’s price volatility, it is best to choose a short-term trading strategy. Day trading is a good example of a very successful investment strategy. The salient point with reference to day trading is that a trade should be opened and closed within a single trading day.
The most significant advantage of day trading is that investments are not exposed to overnight market volatility. Financial markets are affected by each other as well as global social-economic and geopolitical events; therefore, it is not a good idea to leave a vulnerable trade open overnight. If any negative news is released overnight, your trade will be impacted negatively.
On the other hand, should you wish to ignore the daily price volatility, the best long-term trading strategy to use is swing trading. Swing trading by definition is when a trade is left open overnight to capture an asset’s overall market price movement. It should be remembered that with CFD trading, you can trade of both rising and falling prices.
Finally, it is vital to add stop-loss and take-profit points on all trades. Ergo, when setting up a particular trade, you set the position at which the trade will exit if the underlying asset’s price turns unexpectedly.
It is also essential to establish a realistic take-profit point. Otherwise, the trade runs the risk of remaining open indefinitely or turning into a losing trade. The secret is to know when to close a trade or to let it run to maximise its profitability.