What To Trade On Forex 2020 – Tutorial And Brokers
Once you decide to start trading, having a profound understanding of the Forex universe and being disciplined is a must to accomplishing any kind of success. To make money trading online, the prospective beginner should start by forming and testing a scheme of action usually called a trading approach.
The trading approach should be straightforward to follow and embrace position sizing and money management elements. The plan is specially created to evade having emotions get in the way of your trading. Most prosperous Forex traders use a trading plan and a lot of them will attribute their success to adhering to it.
One of the best ways to get ready in Forex is to test and backtest your trading strategy in an online demo account. The demo account enables you to perform your trading plan without engaging any real money.
What To Trade On Forex Today?
In theory, any active currency can be traded in Forex against any other active currency. But in practice, the lion's share of trading is the mutual exchange between several currencies of the most economically developed countries.
Major currency pairs
The most-traded assets here represent some of the world’s largest economies and are traded in high volumes. Higher volumes tend to lead to lower spreads. Among the most popular ones are:
EUR/USD – Euro Dollar
GBP/USD – Pound Dollar
USD/JPY – Dollar Yen
Minor currency pairs
When a currency pair doesn’t involve the US dollar, it’s called a minor currency pair or a cross-currency pair.
Here are a few minor currency pairs:
Swiss franc/Japanese yen
The most popularly traded minor pairs consist of the euro, yen or British pound.
How To Read Forex Quotes
If you're brand-new to the world of trading Forex, the quotes may seem complicated to you. Nevertheless, they're rather easy to read if you know how to approach them.
As for the quote, here currency pair is often followed by a bid and ask price, which will show the spread and the number of pips between the broker's bid and ask price.
The quote currency may be any currency, including another of the common base currencies. For instance, EUR/USD = 1.0800
It makes no difference which currency is the base one, it perpetually equals 1. The quoted amount, 1.0800 is the amount of the quote currency, USD, it takes to equal 1 unit of the base currency, euro.
Bid and Ask Quotes
There are two parts to a Forex quote, a bid and an ask. Here's another forex quote that helps make obvious the meaning of these terms in the Forex market:
EUR/USD = 1.0800/05
Here the bid is 1.0800, and the ask is 1.0805. Considering the difference between a bid and an ask price in ordinary conditions is a very small fraction — less than 1/100th of the currency unit—the convention is that only the last two digits (05) of the four digits are displayed. If you spelled this out, it would look like this:
EUR/USD = 1.0800/1.0805
Here the bid price is 1.0800, and the ask is 1.0805.
How To Read Forex Charts
There are 5 main types of charts - bar, candlestick, line, Point and Figure, and the tick chart.
Charts allow you to observe trends and other general patterns. These all have importance in projecting expected exchange rate fluctuations.
Moreover, the chart can show you exchange rate levels the market earlier turned to the upside at and below which buyers tend to open positions. These are known as support levels since the market finds support there when trying to direct lower.
The charts also display the exchange rates where the market previously turned to the downside. Sellers tend to exist at and just above these so-called resistance levels since the market finds resistance there to upwards moves.
All in all, no matter what is your tactics and style, you'll need to know how to interpret the chart of any asset and quote - you cannot just skip it. Understanding the basic terms in a little more depth can assist you as you get ready to set up your initial trades.