For those who don’t have enough experience in trading currencies, it could sound a bit complicated. However, nothing is too complicated if you are willing to allocate some time to learn. And today, all the knowledge of the world is accumulated on the internet, which means either you can research on your own, or enroll in a webinar.
As for this article, we are giving you all you need to know about trading financial report 2022.
Automated software is taking the burden off your back
We’re mentioning this first to serve as a motivation and as a relief for those who may get confused while we are explaining all about trading.
You’ve probably already heard or read how there are just under 200 currencies in the world today, and the oldest among them is the British pound, which is still in use. This means that there is so much analytical data to be followed not daily, but hourly, if one wants to be well informed. And having the right information on time is crucial if you want to perform a successful trade that will result in profit. We are talking about the information about the financial market, of course.
Luckily, today there is no need for analyzing information on your own because automated software has been designed to do this for you, to save you time and confusion. Click here for more details about how this software works and which are the best ones.
Understanding exchange rates
The simplest explanation of the exchange rate would be that it is the value of one currency against another. There can be two types of exchange rates. It can be presented in pairs, for example, the euro against the US dollar, etc. (so-called bilateral exchange rate), and one currency can be put in relation to the basket of currencies of its most important trading partners (so-called effective exchange rate).
How do you make a profit?
If the rate of one currency rises in comparison to another currency, you can sell it and make money that way. How will you know if the exchange rate will rise or fall? The truth is, some earned a lot on exchange rate differences, and some lost a lot. This type of activity is not an investment but a speculation because the trader bets whether the exchange rate will rise or fall, but the risks are always high.
The most common terms
When you decide to become a trader, you’ll need to choose the right trading software, and we have already mentioned those at the beginning of the article. So, when you do, you’ll encounter a couple of terms, and here are the most common with the explanation:
Ask and Bid prices – The Ask price is the price at which the instrument can be purchased, and the Bid price is the price at which the instrument can be sold. The Ask price is always higher than the offered price, so initially, each trade starts with a loss.
Spread -is the difference between Ask and Bid prices. This price difference is where banks and brokers make a profit, with commissions charged, of course, if any.
Swap rate is the interest added or subtracted to keep a particular currency open overnight. A negative or positive swap rate is calculated based on whether it is a buy or sell and is based on the difference in interest rates for each currency.
Short & Long positions refer to a sale or purchase. When you sell, you enter a short position. When you buy, you enter a Long position.
The Bear & Bull market refers to whether the market trend is convincingly up or down. In the Bear market, prices are falling, while in the Bull market they are rising.
CFD stands for Contract for Difference. These options allow traders to make a profit or loss based on the difference between the entry and exit price of the trade, without taking ownership of the underlying assets. CFDs are popular in forex, stocks, indices and commodity trading.
What else is there to know about trading currencies?
When you google this type of trading, the search will result in tons of ads and articles mentioning forex. It is the abbreviation for the foreign exchange market. This global exchange market has a daily turnover of $ 5.5 billion. Who is taking part in it? The main participants are of course banks and broker companies through which smaller investors also take part in the trade. Wondering what the most traded currencies are? Well, the US dollar, the euro, the Japanese yen, the Swiss franc, the British pound, and the South African are the most traded.
How do you master money management?
When trading you want to make sure your capital is safe and growing. Money Management is a set of rules that will protect your capital and ultimately help grow your trading account.
The most important rule you should stick to is to risk only a small part of your portfolio at a time. By doing so, you will be able to bear the inevitable losses. Is there a fixed risk percentage you can always expect? As a rule, many traders believe in a risk of 2% or less per trade.
At the beginning of each trading week, be sure to check the economic calendar for upcoming high- and medium-impact events.
The value of the “Impact” on the calendar represents the potential that this report can affect the market. If the data published in the economic report differ significantly from what was predicted or expected, then the effect can be achieved. Otherwise, if the data is in line with expectations, the report may have little or no impact.
Successful traders usually check upcoming economic events in the calendar for numerous reasons that can affect the successfulness of the trading activity.
If you’re new in this activity keep in mind that the biggest risk for any new trader is trading without proper knowledge and experience which often results in large losses. On the other hand, as we wrote in the beginning, if you allocate enough time for learning, the risk will decrease.