If you are a Forex trader, you need to be extremely aware of the rates you are working with. These are the crux of what makes a good trade, a great trade, and an awful trade. You want to be looking for the biggest rates of return that you can find, but this is much easier to do in retrospect than it is in real time, unfortunately. Luckily, there are a few really easy things you can do to tilt the odds in your favor.
Trade What You Know
This one should be obvious. You will know some currencies better than others, so you should focus on these. It can be alluring to look at the pairs that have big jumps in price from time to time and try to take advantage of the sudden gains, but if this is the case, and you are not sure what you’re doing, the sudden gains can quite easily become sudden losses. Avoid this. Look to what you know and what you are interested in knowing more about and capitalize off of that interest. It will end up giving you a more steady income in the end, and it will keep you more entertained in the process, thus ensuring that you are going to stick with it even during the inevitable down periods.
Some Forex brokers are better than others. If you focus on the EUR/USD pair–the most popularly traded Forex item–then you are probably going to pay a higher fee for trading than with other pairs. But, this means that you need to be aware of what other brokers are charging, too. Fees in the Forex industry come in the form of the spread; the amount that separates the bid and the ask prices. Sometimes it’s only 5 or 6 pips, but depending on where and when you trade, that can vary. 5 or 6 pips is much less than a penny on the dollar, but if you are trading thousands of dollars of currency at one time, this will add up. Even a difference of a single pip can result in thousands of dollars either way over the course of a year, and this is money that could be in your pocket. If you find a broker that can save you a few pips per trade and has everything else the same with them, that is going to be a far better choice. You might not notice at first, but over time you will.
Seek Out Bonuses
Every once in a while, a broker will offer a deposit bonus. If you can find these, and the terms are favorable, then take them. Unlike other industries, these are not uniformly offered, but they do exist. However, these need to be approached with caution. A bonus is only useful if it makes you money in the end. If there are unfavorable parts of the site that could take away from your bonus, such as unusually high spreads, don’t bother with it. In these instances, it’s usually just a ploy to get you to deposit with them. Some people will earn out their bonus, but most will not.
Use Leverage Right
Leverage is the best and worst tool a Forex trader can have. For small traders, it seems like an amazing opportunity; you can often multiply your trading power by 300 times. With just a single dollar, you can then buy $300 worth of a currency. This could lead to huge profits, but it can also damage your account with just a single trade if you’re not careful. Always trade safely with the proper stop-loss points in place and even automatic selloff points if you worry about short term reversals. This will help to protect you, but a smart use of leverage is prudent. Until you have a lot of experience, use as little leverage as you can and still make a good profit. It’s attractive to try this early, but if you are unskilled, it’s just too much risk.
Being proficient in the Forex market is tough because the markets evolve based upon political and economic news from all over the world. You need to stay abreast of these things, plus the technical factors that you can learn from charts. You may also want to look at alternative forms of trading once in a while in order to add some diversity to your trading. With binary options, you can trade Forex pairs in smaller amounts and with less accuracy and still get a decent profit. Many Forex traders are moving to this type of trading, although both can be very productive for a knowledgeable trader. At the very least, branching out can help you learn more ways to potentially make money. What you do with that information will be up to you, your skillsets, and your needs.