Category: Technical strategy

How To Beat FOMO As A Forex Trader

Emotion is the devil when it comes to forex trading and it’s something that we blog about time and time again. Maintaining a cool, clear and level head is an absolute must at all times, whether you’re new to trading or have been doing it for years. Without this, you compromise your decision-making ability and, before you know it, you’ll start to see more losses than wins.

 

Of course, it’s all very well and good knowing that you need to keep your emotions in check, but how exactly do you go about doing this?

 

It’s certainly easier said than done, especially during intense and emotionally charged situations… if you’re facing a big win or if you’re on the verge of a big loss, your heart can very easily start to rule over your head and this will ultimately spell disaster sooner rather than later.

 

Getting to know yourself on a deeper level is absolutely key when it comes to trading and it’s essential that you’re honest with yourself about your emotional strengths and weaknesses, so you can direct your focus to the right places and really drive your progress as a trader.

 

One particular emotional trait that’s very common in people from all walks of life, not just professional traders, is FOMO – or the fear of missing out.

 

 

What is FOMO?

 

The exact definition of FOMO is feelings of anxiety that arise in the belief that something interesting or exciting is happening right now somewhere else. In the digital age, these feelings are often associated with posts seen on social media, showing other people having an amazing time doing something you’re not involved in.

 

From a trading perspective, this anxiety can refer to the fear of missing out on what you believe is an amazing opportunity. These feelings can be so strong that you suddenly find yourself tempted to stray away from your trading plan and previously devised strategies… which, as we all know, is one of the surest paths to ruin.

 

These FOMO feelings often manifest themselves particularly strongly when your trades start to register a significant rise in value over a short period of time. This can make it seem as though something very exciting is about to break and if you don’t capitalise immediately, then you’re going to miss out on a lucrative opportunity.

 

In this instance, it’s important to refocus and remember that logic and reasoning have their place in forex trading, but emotion should be parked at the door.

 

Remember that you devised your trading strategy when you were cool, calm and collected – and that you carried out detailed analysis of the markets to help you make the right decisions in any given set of circumstances.

 

However, FOMO can be a tricky beast and all sorts of other emotions tie in with it, which can make it very difficult to get a handle on. We’re talking greed, we’re talking impatience, we’re talking excitement, we’re talking jealousy… because it’s so nuanced and so complicated, you may find your FOMO takes over without you even noticing.

 

As such, being honest with yourself about the reasoning behind your trades can help you identify whether your head or your heart is in charge.

 

Ask yourself if you think you’ve adopted a herd mentality approach to trades. Or are you being lured in by the potential for making a lot of money? Or perhaps you believe other traders know something you don’t… any kind of thinking along these lines is no substitute for a strong and well thought out trading plan.

 

 

What triggers FOMO in trading?

 

Knowing what pitfalls to look out for is key if you know you’re susceptible to FOMO and want to do all you can to protect yourself and your trades.

 

There are lots of external factors at play that can trigger your FOMO. For example, market volatility has an awful lot to answer for and you may find yourself tempted to jump on a trade just because it’s trending, without taking into account the direction of market movement.

 

What’s going on in the outside world can also contribute greatly to FOMO. Of course, you need to pay close attention to global current affairs and economics news if you want to make it big as a trader, but this can also have negative effects if you let your FOMO take over.

 

The markets are easily affected by rumours, so make sure you can differentiate between fact and fiction – and that you follow your trading plan if you’re unsure.

 

And don’t forget about social media. As wonderful as it can be living and working in the digital age, social media platforms can be hugely influential over your trading so it’s important not to overindulge online if you can help it.

 

Yes, it’s great to read about success stories of other traders and, yes, this can really spur you on and help you see success of your own… but there is too much of a good thing and if you feel as though the time you’re spending online is having a detrimental impact on your trading, it might be time to step away from the smartphone for a while.

 

 

How to beat FOMO in forex trading

 

As with most things when you’re trading currency pairs, your successes and failures will largely hinge on how disciplined you are and how well you’re able to keep your emotions in check.

 

We’ve said it before and we’ll say it again, following your trading strategy and knowing it inside out should be your go-to for everything. This will help keep you on the straight and narrow, no matter what the markets do and it will allow you to keep a lid on your emotional trades, helping to increase your confidence as a trader at the same time.

 

Your general outlook regarding trading can also help you keep FOMO at bay. Acknowledging and accepting that there is no such thing as a perfect trade and that trading inevitably brings with it ups and downs, no matter how good your strategy is, will help you see that there will always be other opportunities, so it’s ok to let some of them go… no matter how amazing they appear at the time.

 

Something else that we’re strong advocates of is keeping a regular trading journal, which is a strategy employed by the most successful traders out there. This is one of the most effective ways of managing your performance, seeing where you’re doing well and where you may be falling down somewhat.

 

Journaling can help you see that FOMO isn’t all it’s cracked up to be and you should perhaps trust your own judgement more, even if your heart is trying to lead you up the garden path.

 

With all this being said, as much as it’s important not to be ruled by your emotions, it’s also just as important not to ignore them completely. You need to acknowledge your feelings so you can deal with them and move on, becoming a stronger trader for it in the long run.

 

It may be that you’re just not in the right frame of mind to trade and an experienced professional will know when it’s time to take a break, instead of just ploughing on and hoping for the best.

 

 

Forget FOMO, embrace JOMO!

 

Forex trading can be very addictive and, if you’re not careful, you may well find yourself glued to your computer screen more often than not, with nothing but the markets for company day in, day out.

 

Balance is important, no matter what it is you’re doing – and this is where the idea of JOMO can step in to save the day. JOMO – or the Joy Of Missing Out – is all about realising that it’s OK to step away from the trading floor, recharge your batteries, do something else… and that the markets will still be there when you come back.

 

What you don’t want to do is burn out. As a trader, this can prove disastrous and can see you make all sorts of ill-advised trades. But if you work with the idea of JOMO in the background, you’ll always be able to find time for other pleasures in life and this is sure to yield positive results when you do get back to the books feeling fully refreshed.

 

The trading world is a very fast-paced one indeed and this can really prove quite tumultuous on an emotional level, so having some coping mechanisms and strategies in place can help you build resilience and ensure you can continue trading in a positive way. So embrace the JOMO and beat the FOMO today!

 

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Long-Term Or Short-Term Trading: What’s Best?

When you are defining your forex trading strategy, one of the biggest considerations is whether you will commit to short-term trading or long-term trading. Here’s an overview of what both these strategies involve, and how to decide which one might be best for you.

 

What is short-term trading in forex?

Short-term trading is also known as day trading. It usually involves holding an open position for no longer than one day, and can even involve just a few minutes. At the very maximum, short-term trades are executed within one week. This is a popular strategy among new and part time traders, because it minimises the risks involved.

 

That is not to say that short-term trading is without risk, because it is impossible to eliminate risk from any aspect of trading. You will also need to be confident in your knowledge of the markets, and quick in your reactions and decision-making processes. It’s probably not for you if you are prone to getting stressed out under pressure.

 

Short-term traders are also known as scalpers (when the position is held for anything from a few minutes to a few days), or day traders, who always carry out their trade within one day. In forex, scalping is the most popular strategy. It involves building up profits in very small but frequent amounts, and many trades are usually made within one day.

 

What techniques do you need for short-term trading?

While there is no one definitive set of techniques used by all short-term traders, most will use a combination of both technical and fundamental analysis. Technical analysis involves using charting tools to identify the past behaviour of pricing patterns, and making predictions based on the balance of probabilities.

 

Fundamental analysis involves ‘reading the room’ in terms of the wider economic outlook. The markets can be affected by data such as changes in interest rates, inflation, GDP, and the unemployment rate.

 

This information is released on a regular basis by sources from all the world’s major economies, and can be tracked on an economic calendar. Wider geopolitical and socio-economic events, such as elections, wars, pandemics, and natural disasters, also impact on the forex markets.

 

Who is short-term trading suitable for?

Short-term trading is intense and demanding. If you can keep your cool under pressure, and are comfortable making quick decisions, then this may be the right approach for you. It can be very beneficial to read up around the psychology of forex trading. This will help you to be aware of your emotions, and find ways of keeping them in check.

 

Above all, in a fast-paced environment where your reactions and technical skills need to be sharp and precise, remaining emotionally detached and analytical in your approach is paramount. Quick thinking should not be confused with impulsiveness or haste, which will lead into poor decisions sooner or later.

 

If you have an impatient personality and feel drawn to the pace and excitement of short-term trading, remember that you will need mental stamina and discipline to make any impact. The most successful traders are not swayed by anger, excitement, fear, greed, pride, panic, or any of those other human emotions which cloud our judgement.

 

Do you have the time for short term trading?

So, you have decided that you have the personality and technical skills for short-term trading. The next question to ask is, can you meet the time commitments? To have a real prospect of making a profit at short-term trading, you will need to commit to at least a few hours a day, on several days of the week.

 

It is possible to fit short-term trading around a day job, if you work a typical 9-5. This is because the markets are most active first thing between 8-9am, and at the end of the day, between 6-9pm. If you can fit these hours into your schedule, then it’s well worth giving it a go. If that doesn’t sound feasible, then long-term trading may suit you better.

 

What is long-term trading in forex?

Long-term trading typically involves waiting for weeks or even months to take a profit on a trade. Whereas short-term trading involves making multiple very small profits in a short time frame, long-term trading aims to take a larger profit over time on far fewer positions.

 

It is better suited to traders who are not able to make a big time commitment. You can simply open one position at a time, and then monitor it over weeks or months until you identify a good opportunity to buy or sell your currency pairs. Unlike short-term trading, there is no need to constantly monitor the market fluctuations and price action.

 

It is also less intense and highly-pressured than short-term trading, so if you dislike having to make quick decisions, then you will probably be better suited to long-term trading. You will have the opportunity for thorough and methodical research and analysis, which suits those who are naturally cautious and careful in their work.

 

What skills do you need for long-term trading?

Long-term traders (also known as position traders) tend to rely more on fundamental analysis skills than technical analysis. It still requires a thoroughly researched strategy to ensure the best possible chances of taking a profit. Always have a risk management plan in place, and set a profit target and a stop-loss for each trade.

 

A stop-loss acts as a defence mechanism, to limit your losses on a trade, should the market conditions change unfavourably. However, it is important to remember that a position can fluctuate quite a lot even within 24 hours, so it is important to accommodate this within your stop loss.

 

As with short-term trading, it’s important to maintain your emotional discipline, and not be panicked into closing out a position too early if you fear that the market is about to turn. If you are naturally a patient personality, who enjoys looking at the bigger picture, then long-term trading may be the right strategy for you.

 

What if you can’t decide which strategy is best for you?

There’s no reason why you shouldn’t combine both long- and short-term trading in your strategy, if both techniques appeal to you equally. In fact, many successful traders do just this.

 

Trying your hand at both may reveal what you are really cut out for: a taste of the excitement of short-term trading may bring out hidden strengths and mental agilities that you didn’t realise you possessed. On the other hand, you may find that you have a good instinct for fundamental analysis which is best suited to long term trading.

 

If you are new to forex trading, it’s really important to road test your strategies with a demo account before going live. This gives you the opportunity to trade with real-time data with taking financial risks. It will give you a chance to get familiar with your broker’s account user interface, so that you can find your way around quickly and easily.

 

A demo account will give you a taste of what it’s like to make quick decisions, or to build up the emotional resilience to ride out a period of turbulence in the markets. Many new traders don’t fully realise that making a loss is all part and parcel of forex trading, and even successful traders only make winning trades about 50% of the time or less.

 

The key is not to be overly discouraged by failure, or become too emboldened by success, as both these emotions can lead you to stray off your carefully plotted path.

 

Risks and advantages of each strategy

To sum up, here are the main risks and advantages of each approach.

 

Advantages of short-term trading

You can make potentially quicker profits, because each trade is made within a short time frame. The close monitoring of the markets required means that you are more likely to be well placed to take advantage of the major swings when the markets are volatile. If you pick the right moment to buy or sell, you could potentially make a large profit.

 

The risks are usually smaller when you are making short term trades, because you will mostly be trading in just a few percentage points each time. The quick and close nature of the trading means it is easy for you to identify and rectify any mistakes.

 

Risks of short-term trading

Short-term trading is time consuming, demanding a minimum of 15 hours a week. It is also intense and highly pressured, and you will need emotional resilience, mental stamina, and a confident grasp of technical analysis, such as candlestick pattern charts. If you do not have a sound risk management strategy, you could also make heavy losses.

 

Advantages of long-term trading

Long-term trading is less time consuming, and less stressful than short-term trading. You can extend your profitable positions to make the biggest gains, and adjust your stop loss and profit targets according to market conditions.

 

Disadvantages of long-term trading

If you are looking for the thrill of the chase, then long-term trading might be too dull for you. It also requires an in-depth approach, with a strong grasp of both fundamental and technical analysis tools.

 

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6 Ways To Turn Around A Losing Streak In Forex Trading

The forex market is the largest and most liquid financial market in the world, and is full of opportunities to make profitable trades. It’s also one of the most accessible markets, open almost 24/7, and with instant forex funding and high leverage available, even for a small initial investment.

 

For this reason, it attracts seasoned traders and beginners alike. It can be highly competitive, but it is possible to make good profits with the right approach. That’s not to say that it’s easy, and there are many pitfalls that the unwary and inexperienced trader can fall into.

 

Sometimes, you might make a run of losses, and start to wonder if it’s worth staying in the game. However, this is a normal phase that most traders go through at some point. Chances are, the professional traders you know considered quitting at some point after hitting a losing streak.

 

The only difference between them and other people is that they didn’t give up. Instead, they took stock, learnt from their mistakes, and carried on. This is exactly what you can do as well!

 

The other important thing to realise is that losing money is a normal part of forex trading. It doesn’t mean that you are bad at it. It’s impossible to make 100% profits all the time, and most traders accept a 50% win rate, so long as they are making more than they are losing.

 

Success in forex trading is about minimising your losses, and maximising your profits. Here are the steps you need to take to set you back on the right path.

 

Brush up on your knowledge

Live experience on the markets is where you cut your teeth as a trader, but this needs to be backed up with a good background knowledge about how the forex markets work. You should aim to have a good balance of technical analysis skills and fundamental analysis skills, which are integrated into your trading strategy.

 

Technical analysis

Technical analysis involves studying the price movements in the market, to help you predict future trends and understand past ones. This is because price action tends to flow in cycles, which can be used to judge the balance of probabilities for future action. Traders use charts and graphs to help them see data represented in a visual way.

 

Even if you are not a natural with graphs, it is relatively easy to grasp the concept behind them, without going into an immense amount of fine detail. Start with line charts, which are the simplest form of technical analysis tool.

 

They plot the difference between the closing price of a currency pair, from the opening of one trading session to the next. Bar charts show the same information, but include more detail about fluctuations within the trading period. At this stage, it is also a good idea to brush up on your understanding of support and resistance levels.

 

Once you are comfortable with interpreting line and bar charts, there are plenty of more detailed tools and methods to learn about, such as candle stick charts, Bollinger Bands, Fibonacci retracements, Ichimoku charts, Elliot wave theory, harmonic price patterns, and much more.

 

Fundamental analysis

Fundamental analysis involves studying economic data releases and world geopolitical events to help monitor the direction of price action in the forex markets. Each currency is affected in different ways by the flow of trade between countries, which influences the currency price.

 

There are some well known economic indicators which affect currency price, such as Gross Domestic Product (GDP), the interest rate, the inflation rate, and the unemployment rate. Keep an eye on the economic data releases which are relevant to the currencies you trade in, and understand how they might influence price action.

 

Start with a practice account

One of the most common mistakes new forex traders make is to jump straight in with a live account. However, most platforms offer the chance to practice with a demo account, which simulate live trades, but you won’t be using any funds.

 

Even if you are confident in your strategy and have done your homework on analysis techniques, using a demo account can help you get used to the set-up of the platform, and avoid making basic keying errors on an unfamiliar piece of software. It is also a chance to test your mettle, and see how you perform under pressure.

 

Start with reasonably small amounts

One of the reasons that people are drawn to forex trading is the access to high amounts of leverage. While this is a huge advantage, and eventually may lead to excellent rewards, it is always best to start small. Most platforms will give you the option of using smaller than standard lot sizes.

 

The standard lot size in forex trading is 100,000 units of the base currency, but it is usual for brokers to offer mini lots of 10,000 units, or micro lots, which are 1,000 units of the base currency.

 

In some cases, you may even be able to trade nano lots, which are 100 units. While you will not make huge profits form such small amounts, it will also limit your losses until you are a more confident and experienced trader.

 

At the beginning, risk no more than 1% of your total funds on each trade. This way, you can build up slowly rather than plunge headlong into unchartered territory.

 

Know how much you can afford to lose

The foundation stone of your trading strategy should be understanding how much spare capital you have to play with. Always keep on top of your personal finances, and never risk losing money which you need to pay your bills and support yourself and your family in the day-to-day process of living.

 

This is referred to in forex trading as knowing your ‘risk tolerance.’ Without working this out in advance, you will probably end up losing sleep, and also risk losing a lot more! It is also a good idea to understand how stop-loss orders work, as these can protect you from making dramatic losses.

 

Make sure you have a trading routine

Even if you are trading part time, or fitting it around your day job, it’s important to have a disciplined approach to your trading. While there are no fixed paths to success, it’s important to remain consistent and patient with your chosen trading strategy.

 

Successful forex trading is not fuelled by gut instinct and the thrill of the chase; in fact, this is a recipe for disaster! Write down a checklist of the tasks you need to do throughout the day, and tick off each one when you have accomplished it. This will probably involve reviewing your economic calendar for the latest data releases first thing.

 

Also check the wider news reports for any significant geopolitical events which might affect your trading currencies. These include things such as election announcements, domestic unrest or international conflicts, natural disasters, changes of government, and so on.

 

You will then need to study the current market conditions to take stock of the overnight trending patterns, using your favoured technical analysis tools. This will help you to identify the best opportunities for trading over the coming hours. The next step is to review your open positions, in light of what you have already learnt.

 

Only now are you ready to start trading! Never be tempted to skip the previous tasks, no matter how impatient you are to get going with live trading. Which leads us onto the next point…

 

Learn about trading psychology

It is easy to underestimate the importance of being in the right mindset for trading. While it calls for a sharp mind and quick decisions, this must be balanced with good emotional control. Impulsive moves rarely pay off in the long term, so if you are someone who tends to be headstrong and act on instinct, you need to learn how to keep this in check.

 

When we are dealing with the prospect of making profits or losing money, two very primal and powerful human emotions come into play: fear and greed. Studies have shown that the fear of losing is more powerful than the pleasure of winning, which can lead us to be subconsciously overcautious when making trading decisions.

 

This may mean closing positions too early, or hanging on to losing positions for too long, and increasing losses. On the other hand, greed for greater profits can drive us to hang on to a profitable position for too long, and miss the optimum selling point.

 

So, how do we guard against such emotional biases in forex trading? The first step is to recognise that everyone is prone to them, no matter how cool under pressure we may be. The next step is to learn some techniques to help you view situations in a more detached and objective light.

 

Some people find that meditation is a good way to help them do this, and practice a routine for 20 minutes at the start of each day. It can help to prepare them for the rigours ahead, improve concentration, resilience, and reduce stress levels.

 

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What You Need To Know About The World’s Major Currencies

The forex market is all about trading the world’s currencies against each other, as their value is in a constant state of flux. Forex traders track the movement of the market with technical analysis tools and other methods, in order to try and buy and sell currency pairs for a profit.

 

The language of forex currencies

Currencies in forex trading are always quoted against each other in pairs, and the exchange rate is the relative price of the two currencies. The base currency is always quoted first, and the quote currency second. Each currency is identified by a three-letter alphabetic code which is shorthand for the nation or economy, and the name of their currency.

 

For example, the US dollar is listed as the USD, the Euro is listed as the EUR, and the Great British Pound is listed as the GBP. Each currency is also linked to a numerical code which is used for computer algorithms, but traders always refer to the alphabetic code.

 

Forex traders track how much the quote currency has risen or fallen in value compared to the base currency by looking at the Percentage in Point, or ‘pip’ for short. This represents the change in value between two currencies, and it is the smallest whole unit price movement that can be made. It’s expressed as the last decimal place of a price quote.

 

A forex trader is always looking to buy currencies which they expect to rise in value (known as going long), or sell currencies which have risen in value (known as going short). They may also make the decision to sell off currencies which have not risen in value, but they expect to fall in value, in order to mitigate against further losses.

 

Currencies are purchased and sold in lots, and the lot size refers to the units of base currency in each trade. A standard lot size equals 100,000 units of the base currency. This might seem like a high amount, but because the changes in value are based on the pip percentage points, it is necessary to make any kind of worthwhile profit.

 

Forex traders usually trade through a broker platform, which offers them instant forex funding and allows them borrow money to make trades, even from a modest initial investment. This means that a trader with a prudent risk management plan and a strong technical understanding can make healthy profits, even through part time trading.

 

Most brokers will usually enable the trading of smaller lot sizes, known as mini lots, micro lots, and nano lots. This is useful for new traders who are just starting out in the market, and want to learn how to trade without the risk of significant financial losses. For example, a mini account can be opened with as little as $100.

 

The major currencies

Most new forex traders trade in the major currencies, because they have a high degree of liquidity on the market. This means that there are always plenty of buyers and sellers to be found, and they are less prone to dramatic fluctuations in value. The minor currencies and exotics (from developing or emerging economies) are more prone to volatility.

 

The six major currencies of the world are the US dollar (USD), the Euro (EUR), the Japanese Yen (JPY), the British Pound (GBP), the Swiss Franc (CHF), and the Canadian dollar (CAD). Here’s a look in more depth at what influence each currency has in the forex market.

 

The US dollar

The USD is the most traded currency in the world, and is the most widely accepted currency throughout the world. Some developing countries use it as their own major currency, instead of a more local one, for this reason. Other countries peg the value of their own currency to the US dollar, because it is regarded as the safest and most stable in the world.

 

The US dollar also the used as the standard currency lot for many high-value commodities, such as crude oil and precious metals. When there are significant fluctuations in the value of these commodities, such as rising oil prices, it has a direct impact on the value of the dollar. Therefore, most forex traders will keep an eye on the major commodity prices.

 

The Euro

The EUR is the second most traded currency in forex, despite only being introduced in 1999.  It is also the second most used currency around the world, and is the official currency of 19 of the 27 EU member countries. Most of these countries, such as Germany, France, and Spain, have strong, stable and well-developed economies.

 

Factors which influence the value of the Euro include the unemployment rate, the Consumer Price Index, and the inflation rate. One of the drawbacks of the Euro was demonstrated during the global financial crash of 2008/9.

 

Because it is tied to smaller and less stable economies such as that of Greece, as well as the larger ones, the problems of one affect the value of the Euro as a whole. It can be difficult to establish a status quo which is beneficial to all the parties, and it is more prone than other currencies to be moved by the influence of political events.

 

The Japanese Yen

The JPY is the third most frequently traded currency in the forex market, and the most traded Asian currency. It is used a measure of the wider economies of the Pan-Pacific region.

 

 Part of its popularity on the forex markets can be attributed to its role in the carry trade. This is because Japan’s interest rates are deliberately kept low, meaning that traders can borrow at low or no cost to invest elsewhere, and make a profit on the difference.

 

Although Japan has a strong economy built around manufacturing and export, the fact that the JPY is borrowed to such a high degree means that it rarely rises substantially in value during times of economic stability.

 

However, it has an advantage when there is turmoil and uncertainty in the markets, because it remains shielded from fluctuating interest and inflation rates, and it is seen as safer than the US dollar or Euro.

 

The JPY is a stable currency, and also very secure. Yen notes and coins carry advanced security features which makes it almost impossible to produce counterfeits.

 

The British Pound

The GBP, also known as sterling, is the world’s fourth most traded currency. It’s often paired with the USD and the EUR, but much less frequently against other currencies. The high value of the pound against other currencies makes it popular in the forex markets.

 

The value of the GBP is closely linked to the political stability of the country and the performance of the economy. The most common indices used to value the GPB include the Consumer Price Index, the Gross Domestic Product (GDP), the average earnings, the GDP per Capita, and the GDP Deflator.

 

The UK is traditionally regarded as a politically safe and stable country with a strong economy. However, the economy is currently under some extra pressure after the UK’s official withdrawal from the European Union at the beginning of this year.

 

The Swiss Franc

The CHF is regarded as a ‘safe haven’ currency, which is not prone to great volatility on the forex markets. Switzerland is a country with a tradition of maintaining political neutrality on the world stage. It is a not a member of either the EU or the G-7 countries, and it has a risk-averse approach to its economy.

 

Although the Swiss economy is small, it has one of the world’s larger reserves of gold, which tends to hold its value, meaning that it is protected from the effects of inflation. The CHF is seen as a good investment for those looking for a high degree of security, stability, and protection from inflation.

 

The Canadian dollar

The CAD is major currency because Canada is a country rich in natural resources, and it is one of the world’s major exporters of commodities such as crude oil, precious minerals, timber, and natural gas.

 

Therefore, the value of the CAD is closely correlated with the relative price of these commodities, and this can lead to periods of volatility on the forex markets.

 

Nonetheless, it is regarded as a benchmark currency by the world’s Central Banks. Canada’s close proximity to the US also helps to boost its trading position, as the US economy is the largest and most active in the world.

 

Other commodity currencies

Some references will also list the other commodity currencies, the Australian dollar (AUS) and the New Zealand dollar (NZD) as major currencies.

 

Australia is rich in natural resources, including precious minerals and metals, oil and agricultural products. This means that the AUS is popular with commodity focused forex traders, although subject to the market fluctuations you would expect.

 

Likewise, the NZD is a strong and stable commodity currency which is widely traded on the forex markets, and is popular with the island territories of the South Pacific.

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What’s Your Trader Personality Type?

A certain level of self-awareness is absolutely vital for any trader worth their salt and if you want to enjoy a lucrative career trading currency pairs, then it would perhaps be advisable to turn the lens inwards from time to time, focusing on yourself, your personality, your attributes and your characteristics… all of which can help you improve as a trader – and as a person.

 

It can be a cutthroat world and not everyone is suited to life as a trader but, that being said, there are lots of lessons to be learned along the way so even if you’re not quite cutting the mustard at first, there’s absolutely no reason why you can’t evolve and become the trader you always knew you could be.

 

In terms of personality types and trading psychology profiles, it seems that there are 15 different general trader types that people typically fall into and understanding where you sit in this regard could prove particularly useful if you are trying to up your trading game but don’t know where to begin.

 

These profiles were devised by Dr Van Tharp, a professional psychologist and trader coach who has written many books on the subject… which could be useful research and reading material if you’re keen to grow and evolve as a trader.

 

If you head to the Van Tharp Institute website, there’s a test you can take that will help you determine what your trading personality is. Arming yourself with this knowledge could help you in the future, allowing you to uncover more of your strengths and work out how best to go about addressing the challenges you’ll come across that could affect trading profitability.

 

The 15 different trader personality types are:

 

• The Accurate Trader
• The Administrative Trader
• The Artistic Trader
• The Adventurous Trader
• The Detailed Trader
• The Facilitative Trader
• The Fun Loving Trader
• The Independent Trader
• The Innovative Trader
• The Planning Trader
• The Socially Responsible Trader
• The Spontaneous Trader
• The Strategic Trader
• The Supportive Trader
• The Values Driven Trader

 

Over the next few blog posts, we’ll be drilling down into each of these psychological profiles to help you find out more about each one and to see where you fit.

 

It’s likely that there will be overlap between the different profiles, but it could be useful to find out which one is most applicable to you so you can see if there are any changes you could make to your trading strategy to give your career a bit of a boost.

 

There are some desirable traits that Dr Tharp did identify among all of the very best traders he worked with, which could also prove helpful where your evolution as a trader is concerned.

 

Working on your ability to look at the bigger picture and identify trading opportunities, using analysis and logic when forming trading decisions and being organised and decisive can all really help your performance, it would seem.

 

Unfortunately, there are only two identified trader personality types that have all these characteristics: the Strategic and the Planning Trader. So if you don’t fit into these categories, you may have to put some hard graft in so you can see the successes you’ve always dreamed about.

 

To help you work out where you sit among these psychological profiles, here are the first three in more depth.

 

The Accurate Trader

 

As the name might suggest, the Accurate Trader is someone who is incredibly detail-oriented, keeping in-depth records of everything related to their trading so they can conduct highly focused analysis to aid decision-making and filter good opportunities.

 

This is an incredibly useful trait to have for anyone interested in FX trading and prioritising accuracy and putting data analysis at the heart of everything you do will certainly stand you in excellent stead as a trader.

 

In fact, as an Accurate Trader you already have one of the three core qualities that top traders seem to possess – the ability to work sequentially, decisively and in an orderly fashion. So that’s a great place to start!

 

This personality type is generally very responsible and reliable in all areas of their life, knowing what needs to be done and how to go about doing it in order to achieve success.

 

However, if this sounds like you, one trap to be aware of is focusing so hard on your analysis and data that you forget to make time to actually trade. Remember to strike a balance and put all your hard work into practice. Otherwise, those wins will remain out of reach!

 

Looking at the bigger picture can be difficult if you’re an Accurate Trader and devoted to zeroing in on the finer details, so make sure that you take a step back and review the market as a whole from time to time, as well.

 

If you’re just starting out as a trader and you feel as though you sit within this psychological profile, advice from Dr Tharp is to consider learning from a mentor so you can see how to do it and gain experience through practical applications.

 

The Administrative Trader

 

Do you consider yourself to be a highly rational and practical person? Are you able to make strong, firm decisions as and when the need arises? If so, it could well be that you fit into the Administrative Trader personality type.

 

When FX trading, it’s essential that you’re able to keep your cool and follow your trading strategy to the letter when faced with potentially volatile or difficult situations and Administrative Trader types are very good at doing this.

 

The market is unpredictable and prone to fluctuations, so being able to ride the wave and keep panic at bay is an excellent trait to foster if you can, allowing you to make good decisions quickly. If you’ve already got this skill, great! You’re well on your way to seeing trading success.

 

Administrative Traders make naturally good leaders, so if you are in a position of responsibility elsewhere in your life, you may well find that you fit into this personality type.

 

Do you strive to ensure that everything runs smoothly and productively? Do you consider yourself to be highly organised and efficient? If so, it’s possible that this is where you fit in.

 

As an Administrative Trader, you will already have two of the top three core qualities typically seen in great traders – doing things sequentially and in a decisive and orderly way, and making decisions based on logic and analysis.

 

One top tip from Dr Tharp to help those who position themselves here is to ensure that you follow the right guidelines or advice. Because you love the details of trading system analysis and development so much, you can easily be led astray if you’re not careful.

 

You may also find that you’re overly critical and only pay attention to the negatives in your trading. Recognising your mistakes will be key so you can learn from them and ensure you progress as a trader.

 

Stress can also be problematic for Administrative Traders and, if things start to go wrong, you often find yourself simply working harder… which can increase your stress levels and this, in turn, will have a big impact on your trading and the decisions you make.

 

The Artistic Trader

 

If you’ve been identified as an Artistic Trader, it’s not all good news.

 

Unfortunately, your particular psychological profile isn’t particularly well suited to the world of forex trading – and Dr Tharp even goes so far as to suggest that you find a trustworthy money manager to handle your account if you discover that the trading work you have to put in doesn’t align with what you really want to create.

 

The characteristics you do have that are beneficial from a trading perspective include your ability to be open minded, adaptable and flexible when you trade. You may also find that you’re effective at identifying patterns and spotting the early signs of changes in the market, which will certainly help you see success.

 

However, you may not be as adept at finding and fixing your mistakes and you may find yourself being increasingly led by your emotions, which can spell disaster if you’re not careful.

 

Your need for excitement may also have a negative impact on your trading performance and Dr Tharp suggests that you find other ways to fulfil this need, such as poker. As he observes, good trading is boring and it requires you to follow rules and repetitive processes, with daily preparation a must… which may not appeal to you as an Artistic Trader.

 

Looking for forex funding right now? We have an instant funding program available so you can get started with a live account immediately – ideal for profitable traders who want to take their trading profits to the next level.

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What You Need To Know About Fundamental Analysis

You will probably be aware that you need to learn some technical analysis tools to get ahead in trading, and make the most of instant forex funding. Understanding how to interpret line charts, bar charts, and candlestick charts can help you to monitor the rhythm of price action for your currency pairs.

 

Technical analysis skills can lead to more informed and less risky trading decisions. However, some traders pay much more attention to fundamental analysis to guide their trading decisions. This involves using the economic data releases and wider current affairs to make predictions and look for patterns, rather than analysing charts and graphs.

 

Even if this is not the strategy you want to use for your core trading decisions, it’s still useful to have a basic understanding of how these factors influence the forex markets. Some traders find that paying equal attention to technical and fundamental analysis works well for them. Here is an overview of why traders use it to inform their actions.

 

What is fundamental analysis?

Fundamental analysis looks at the factors that influence the supply and demand of currencies and commodities, and consequently, the currency prices and exchange rates. This involves keeping up to date with current affairs, with an eye on political, economic and social changes and developments.

 

That all sounds like fairly basic stuff, you might be thinking. It is easy to keep up with the GDP and so on for your chosen currency nations. A politically stable nation that is doing well economically will have higher currency values than one with weak leadership and a flagging economy, which seems fairly obvious.

 

 However, the complexity lies in the sheer amount of data that is available, and understanding what is relevant, and its probable effect on the markets. Here’s a look at what forex traders keep a beady eye on.

 

Economic data releases

Governments and private organisations will release data which gives an indicator of the country’s economic performance. These are released to a schedule, and there is data relevant to most of the world’s major economies released on a daily basis. In fact, it’s pretty much impossible to keep on top of all of it.

 

This is why forex traders will often keep track of them with an economic calendar, which are freely available to download from financial websites. Some economic factors are very well known to affect the currency value, such as the interest rates and the inflation rates. Others are less known, such as the durable goods orders.

 

Some of the data is based on hard sales figures, and some of it is based on surveys and opinion polls. The data can be interpreted to show how well the economy has performed over a past period of time, how well it is doing currently, or to predict how it might perform in the future.

 

The data that is of the greatest interest to traders is that which will indicate how an economy might develop in the future. The data should then be further filtered into that which will have a low impact on the forex markets, and that which will influence price action. Here’s a look at the most important indicators.

 

Gross Domestic Product (GDP)

GDP is the most general economic weathervane of a country. It is the total market value of all the goods and services produced over a year, and it can confirm whether or not a country is in recession. Although much of the data is historical, two consecutive quarters which show a contraction of GDP are the official definition of a recession.

 

Unemployment Rate

The unemployment rate is related to GDP, as it is a good indicator of the economic health of a country. It includes figures for the percentage of a population who are actively seeking paid work, rather than those who are economically unactive and not seeking work. This is especially relevant in the US, because the dollar is the most widely used currency pair.

 

If the data is worse or better than expected, this can impact the forex markets. It’s tied to how much demand there is likely to be for goods and services, and how confident businesses and consumers are about spending and investment decisions.

 

Consumer Price Index (CPI)

The CPI is a measure of the price of consumer goods and services. Representative samples from over 200 categories are used to compile a report which shows the cost of various goods at the moment of publication. Forex traders should narrow down the focus to the cost of exports, because this is the most relevant to the exchange rates.

 

If your trading pairs include the US dollar, which the majority of currency pairs do, then you should pay particular attention to the US specific releases. These include Nonfarm Payrolls, the Federal Funds rate, the University of Michigan Index of Consumer Sentiment, and the Industrial Production Index.

 

The Central Banks

In the UK, the Central Bank is the Bank of England (BoE). It has the power to raise or lower interest rates, which can influence the inflation rate. In the US, the central bank is known as the Federal Reserve. Higher interest rates in the US will make the dollar more powerful, and lower demand for other currencies.

 

 They can also introduce economic policies, such as quantitative easing, which will strongly impact the nations’ economy. Therefore, it’s important to follow all the statements and comments made by central bank representatives.

 

Geopolitical events

The world is in a particularly turbulent phase at the moment, with the Russian invasion of Ukraine still sending shockwaves around the world, the effects of the pandemic still reverberating in the economy and the wider population, and the ongoing conflicts in the Middle East.

 

The effect of the war in Europe can be seen at the moment, with a strain on oil and gas supplies, and certain food products. Geopolitical events don’t have to be on such a big and dramatic scale, however. They can be local election results, changes in government policy, scientific developments or discoveries, and many other factors.

 

Natural disasters will also have a significant impact on the economy and therefore value of a currency. This could be through lost labour hours, decreased productivity, the cost of repairs and rescue operations, disruption to transport and supply chains, destruction of goods and service centres, increased sickness rates, and a whole host of other factors.

 

As we see the more extreme effects of climate change every year, once relatively rare events, such as hurricanes, wildfires, floods, and water shortages, occur around the world on a regular basis. Therefore, forex traders who employ fundamental analysis techniques will keep an eye on the news for climate related events.

 

Even less dramatic weather events, such as a colder summer than usual, can drive changes in the demand for consumer goods and energy prices. For example, predicted sales of barbecues and beachwear may be below par, while energy use goes up, and unseasonable goods, such as waterproof clothing, experience unexpectedly high sales.

 

The key takeaway is that unexpected, or even predictable changes, can cause turbulence in the markets. This can open up opportunities for a trader to maximise profits, or adjust stop loss margins.

 

Seasonality in forex trading

Some seasonal factors can be used to predict the way the forex markets will react. These include national holidays, especially those in countries with major economies. Christmas, Thanksgiving, Independence Day, Halloween, Easter, and so on will all have an impact on the demand for certain goods and services.

 

Seasonality refers to both calendar events and climatic conditions. For example, during the summer, many people go on vacation, causing increased demand for fuel and foreign travel. If the weather is warm, air-conditioning units and garden furniture sales may go up, and poorer than usual weather may impact on the tourism and hospitality industry.

 

The weather can also influence harvests and therefore food production, which in turn affects export and imports rates, and ultimately the balance of trade between nations. Therefore, it’s important to know which are the major commodity exports and imports of the countries whose currencies you trade with.

 

Some seasonal factors are cyclical, and predictable, such as fixed calendar holidays, which can drive demand for certain goods and services. This allows traders to identify patterns which helps them to predict the best times to make profitable trades for their chosen currency pairs.

 

Different currencies tend to ebb and flow according to the time of year, but there is not always an easily identifiable explanation as to why this is. September is generally the most volatile month on the forex markets, with lows occurring in February and August.

 

How do traders use fundamental analysis in their strategies?

By looking for the probable future direction of the markets, forex traders identify a key price level that they expect the price to break through, and use this as a guide to buy or sell for maximum profit. To learn how to make the most of this strategy, traders should make sure that they understand support and resistance levels.

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Top Forex Technical Analysis Tools To Learn

One of the most common pieces of advice given to beginner forex traders is to learn some technical analysis skills. This can seem like a slightly scary prospect if you are not naturally great with graphs and charts, but it’s actually more important to understand the concept behind the ideas than to grasp all of the fine detail.

 

This is because even the expert analysts make wrong decisions sometimes, and no two technical analysis traders will interpret data in the same way. As long as you are aware of the major tools and have some idea of how to use them, you will then have the freedom to decide which ones to learn about in more depth to help your trading.

 

So what is technical analysis?

Technical analysis is the study of price movements in the market, to help traders predict future trends, and therefore make the most profitable trading decisions based on their knowledge. Analysts study historic chart patterns and indicators of price action to inform their approach.

 

This is based on the theory that the rhythm and flow of price action tends to repeat itself. So, by studying how prices performed in the past, it is possible to predict future movements, on the basis of probability. The easiest way to examine and interpret the data is through charts, because they allow you to see the patterns in a visual way.

 

So, all technical analysis involves reading charts based on historical data. Indicators can then be applied to these charts, to identify the most profitable entry and exit points into the market for forex traders. It allows you to spot the best trading opportunities, and make the most of your forex funding.

 

Some traders make their decisions based solely on using technical data to read the probabilities of future price movements. Other traders rely solely on the economic data releases and wider macroeconomic events to make their predictions and decisions, which is known as fundamental analysis.

 

 There is no right or wrong way of applying analysis tools; in fact, many traders combine several methods.

 

What are the benefits of using technical analysis?

Technical analysis can be used to provide the most probable entry and exit in the market for a profitable trade. They also offer a good form of risk management, because they give you some insight into how the market is trending at a particular time or price point, thus reducing the amount of loss-making decisions that you make.

 

Once a trader has grasped the concept of technical analysis, the tools and techniques can be applied to a wide range of markets to identify trends. The majority of traders now use at least one form of technical analysis to help them identify the best potential trading setups.

 

What different types of charts are there?

So, forex technical analysis is all about the charts. They are simply the best method of visual representation of price movements over a set period of time. It probably won’t surprise you to learn that there are several different types of chart which are the tools of the trade. Here’s a look at some of the most popular price charts.

 

Line charts

Line charts show a currency pair’s movement over a set period of trading time. This could be months, weeks, days, hours, or even minutes. The construction of the chart is much like any other that you would use to see visually represented data over time: the horizontal x-axis represents the time scale, and the vertical y-axis represents the price scale.

 

The lines on the chart plot the difference between the closing price of a currency pair from one trading session to the next. It does not show the fluctuations of price within the trading period, just the overall closing trend, whether upwards, downwards, or no change.

 

Some traders prefer to use just the closing trend, which they consider more relevant to their decisions than opening prices or fluctuations within a trading period. Line charts allow the viewer to take in the big picture, which is useful for long-term trading strategies, over weeks or even months.

 

If you are a complete beginner getting to grips with technical analysis tools for the first time, then line charts are an excellent introduction. They allow for an easily digestible overview of the market, without the extra complications of a high volume of data within each movement.

 

Bar charts

Once you have got comfortable with line charts, then the next step is to get to grips with bar charts. These provide a greater level of detail than line charts. They show the high, low, open and closing prices (sometimes abbreviated to HLOC charts). This means that they can visually represent volatility within the markets, in a way which line charts cannot.

 

The chart displays vertical lines which represent the highest and lowest price points in a single trading period or segment of time, with the opening price indicated by a dash to the left, and the closing price indicated by a dash to the right. A bar that has closed up is represented in green, and a bar that has closed down is represented in red.

 

The vertical height of the bar is dictated by how much variation there is between the opening and closing price of a currency pair. This provides a good way to view the volatility in the markets, as well as giving an overall picture of whether the market is bullish (on the rise) or bearish (declining).

 

Candlestick charts

The candlestick chart is similar to a bar chart, but it has a slightly different format. Technical traders often prefer them to bar charts, because they are easy to read at a glance. Like the bar chart, they display the HLOC prices for each specified trading period. However, the data is displayed in a slightly different visual way.

 

The vertical is represented as a block, or the ‘body’ of the candlestick. This indicates the range between the opening and closing prices. The block is filled or coloured in if the closing price was lower than the opening price. The block is left unfilled if the closing price is higher than the opening price.

 

Some charts will use black and white colouring, whilst others may use red and green, or other colour combinations. This allows the viewer to see from one glance whether a currency pair has closed up or down, and if the overall market trends are bullish or bearish.

 

A black or red candle indicates a seller’s market, because the closing price was lower than the opening price, while a white or green candle indicates a buyer’s market, because the closing price was higher than the opening price for that particular currency pair.

 

More detail can then be ascertained by studying the candle ‘wicks’, or upper and lower shadows, which are vertical lines above and below the main body. These show the highest and lowest prices for each period, rather than the opening and closing prices.

 

If the lower wick is longer than the body of the candle, it is known as a ‘hanging man.’ This is indicative that the price declined somewhat, but then recovered, which can be a sign of a bullish market, and therefore a good time to close open positions.

 

The opposite occurrence is known as a ‘shooting star.’ This is when the upper wick is longer than the body of the candle. The closing price should also be near to the low of the candle, which is indicative of a bearish market, and can help to inform decisions about when to enter the market, or alter stop losses to minimise risk.

 

 

 

Interesting fact: candlestick charts have been in use since the 18^th century, when they were used by Japanese rice traders. They were only widely adopted by the West when Steve Nison published Japanese Candlestick Charting Techniques, in 1991.

 

How to decide which analysis tools to use

The charts that you use will depend on how familiar and comfortable you are with reading the charts, and what trading strategies you want to adopt. If you are a beginner, you will probably want to keep things relatively simple, and not overwhelm yourself with too much information at once.

 

It will also depend on whether you want to adopt a long or a short-term trading strategy. The shorter your trades, the more detailed information you will need, so studying bar or candlestick charts will be necessary. Longer term traders may be able to rely more heavily on line charts.

 

Other technical analysis techniques

The three charts discussed above are just a few of the technical analysis techniques that forex traders use. If you are a novice, they are a great place to start, because the charts are relatively easy to understand and use to read trends and patterns in price movement.

 

Once you become more expert you can then begin to learn all about Bollinger Bands, Fibonacci retracements, and pivot point indicators to really get to grips with in depth technical analysis.

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What You Need To Know About Currency Pairs

Understanding currency pairs is a key element of successful forex trading. It’s all about buying one currency and selling the other, at a strategic price point calculated to minimise losses and maximise profits. Here are some essential points about currency pairs that every forex trader needs to know.

 

How do currency pairs work?

The values of the currencies are constantly fluctuating in response to market forces. A currency pair is the value of two different currencies quoted against each other. The base currency refers to the first listed currency of the pair, and the second listed is referred to as the quote currency.

 

The comparison of the pair allows the trader to see how much of the quote currency is needed to purchase the base currency. This forms the basis of the decision to buy or sell currencies in order to make a profitable trade on the foreign exchange, or forex market.

 

The forex markets enables the conversions of currencies for international trade and investment purposes, and also allows currencies to be bought, sold, and exchanged on a speculative basis. Instant forex funding is available with a low barrier of entry to anyone who wishes to trade, and the markets are open almost 24/7.

 

The buyer transaction process involves buying the currency and selling the quote currency, and the seller process involves selling the base currency and buying the quote currency. The bid price is the buying price, and the ask price is the selling price.

 

All currencies are identified by a three letter alphabetic code, e.g. USD for US dollars, known as the ISO (International Organization for Standardisation) Currency Code. The codes also have a corresponding three digit numeric code which is used for computer algorithms, although for trading purposes the currencies are quoted using the alphabetic code.

 

The ISO document states: “ISO 4217:2015 specifies the structure for a three-letter alphabetic code and an equivalent three-digit numeric code for the representation of currencies. For those currencies having minor units, it also shows the decimal relationship between such units and the currency itself.”

 

It adds: “ISO 4217:2015 is intended for use in any application of trade, commerce, and banking, where currencies and, where appropriate, funds are required to be described. It is designed to be equally suitable for manual users and for those employing automated systems.”

 

The full listing of ISO codes was established in 1978, and can be found on their website. The base and quote currencies are listed together thus: USD/EUR. The United Nations recognises 180 currencies that can be traded on the forex market, and if you do the maths to work out all the possible combinations, that’s. . .a lot.

 

What are the currency categories?

The three categories of currency pairs are the ‘majors’ the ‘minors’ (sometimes referred to as crosses) and the ‘exotics.’ Major currency pairs always include the US dollar (USD) and one of the other most commonly traded currencies of the world.

 

These include the Euro (EUR), the Japanese Yen (JPY), the Swiss Franc (CHF), the Australian dollar (AUD), the British pound (GBP), the New Zealand dollar (NZD) and the Canadian dollar (CAD). The Australian, New Zealand and Canadian currencies are referred to as commodity currencies, because both countries are rich in commodities, such as coal, oil, and metals.

 

Major currency pairs

The currency pairs which are most often traded together are the majors, and they have the most liquidity, which refers to how quickly and easily the currency can be bought and sold on the markets. This means there is less risk associated with trading these currencies, because there are generally always buyers and sellers to be found.

 

There is some variation of liquidity even within the major currency pairs. For example, the USD/EUR is one of the most liquid pairs in the world, while the AUD/USD or the NZD/USD are less liquid, as they are from smaller or more specialised economies.

 

Minor currency pairs

The minor currency pairs are those pairs which are from the major currencies, but which don’t include the US dollar. For example, they may be a pairing of the British pound and the Eurozone (GBP/EUR), but as a result of not being paired with the USD, they will have less liquidity on the market.

 

You may also hear of minor pairs referred to as crosses or cross currencies.  A cross currency means any currency which does not contain the USD, as opposed to a minor, which is a pair not including the USD, but which are still from a major economy.

 

The most often traded minors included currencies from the three major economies of Japan, the UK and the Eurozone. Minors are the most traded pairs after the majors. While they still offer profitable opportunities for traders, it’s important to do some careful market analysis before making your move with the minors.

 

Exotic currency pairs

Exotic currency pairs refer to a pair from a combination of a developing or emerging country or economy, and a major currency. An example of this would be the South Africa Rand (ZAR) and the USD. It could also be a combination that doesn’t include the USD, such as the Euro and the Swedish Krona (SEK).

 

Two exotics can also be paired together, known as exotic v exotic, such as the Kuwaiti dollar (KWD) and the Singapore dollar (SGD).  Exotics are traded less frequently than the majors or minors, and have less liquidity. They can be prone to more volatility, which makes them riskier, but also provides lucrative opportunities for the discerning trader.

 

Therefore, it is usually recommended that only experienced forex traders trade the exotics. However, with some research and preparation, it is quite possible to successfully trade the exotics.

 

Advantages and disadvantages of trading minors

While most newbie traders are advised to begin with the majors, there can be advantages to trading minors. They are most suited to those with a medium- or long-term trading strategy, rather than a short day trader.

 

Those who are skilled at close market analysis are best suited to the minors, as it is possible to spot highly profitable trades in a less competitive and crowded arena than in the majors. However, it can be harder to get out of a less profitable trade, for example when there are delays in obtaining prices, so this requires careful vigilance.

 

If you have enough capital and a flexible enough risk tolerance to withstand some occasional losses and slippage, then trading the minors could be well worth your time. Th best strategy is to identify consistent long term trends and patterns in the market, and pay attention to economic data releases for your chosen currencies.

 

Advantages and disadvantages of trading exotic currency pairs

Exotic currency pairs from developing and emerging markets are still affected by changes to the USD, so it’s important to keep an eye on the economic calendar for the latest relevant data releases. However, in general, they are not as sensitive to general market forces as other types of currency.

 

Exotics are a lot less liquid than the majors and minors, so it is more difficult to achieve a target price zone. They may require more capital to make up for higher spreads, and are prone to sudden rapid devaluation. Therefore, they are considered riskier to trade with than other currency pairs.

 

However, the greater volatility of the exotics also leads to significant opportunities for the discerning trader.

 

Some exotic pairings are more profitable and reliable than others, so if you want to have a try, it’s worth starting off with the more popular pairs, including the JPY/NOK (Japanese Yen/Norwegian krone), the AUD/MXN (Australian dollar/Mexican peso), the EUR/TRY (the Euro and the Turkish lira) and the USD/THB (the US dollar and the Thailand baht).

 

Trading an exotic against a strong major, particularly the USD, is a good strategy which yields more predictable results than other pairings. This is because the USD is so powerful, that it can sway the price of smaller currencies in its wake, making it easier to trade off the back of market swings.

 

If you live a country which has an exotic currency and speak the native language, you are also better placed to trade with that currency, because you are able to observe at close hand the economic factors which might influence the price movements, and have knowledge of them before the rest of the world takes note.

 

If you are thinking of trading an exotic but you don’t speak the native language, be aware that any information you receive may be out of date, second hand, and/or poorly translated. Trading two exotics against each other is even more of a risk, and you may find that brokers are unwilling to offer leverage for this in any case.

 

Conclusion

Currency pairs fall into three categories: major, minor, and exotic. The major currency pairs always include the USD, and have high liquidity, meaning that they move large quantities of currency on a daily basis. This makes them easier and less risky to trade than minors and exotics, so if you are new to forex trading, the usual advice is to stick with the majors.

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EXPERIENCED DAY TRADER’S METRICS

What is your name and location?

My name is DAI. I come from An Dao, Phu Ninh, Phu Tho country Vietnam

 

How long have you been trading?
I have been trading for 2 years

 

Have you used other prop firms before?
I have never owned a prop account before FTUK.

 

Why did you choose us?
You guys have modes that are quite suitable for my trading style! Your growth program is quite
impressive too!

 

What has been your experience with us so far?
Trade with tight capital management! Don’t break the trading rules!

 

What is your main trading style?
I use an RSI indicator and day trading! I always follow my rules and never break them.

 

Do you have a trading plan in place, and do you follow it strictly?
Of course, this is vital in this profession.

 

What is your favourite instrument to trade?
My favourite tool is the RSI and trade on many different forex pairs.

 

What would you say to the other traders trading with FTUK?
You enter a few orders, manage your capital closely, and be patient!

 

What are you goals long term in trading?
I want to improve my skills and earn stable money from this job!

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