The first thing that triggers your mind when you think about forex trading is high volumes—loads and loads of funds flowing from one country to the other. It voices concerns about economic-related issues in society.
As per the research firm LearnBonds, the daily average turnover of the international FX market is touching 6.6 trillion dollars. Earlier, it was swinging between $ 5.1 trillion to $5.3 trillion. But things are altering quickly as the volumes are hiking.
Traders and developing countries are stocking the best currencies like the US dollar and Euro to strengthen their forex reserves.
These steps roll out the confidence of foreign investors, and they start taking the currency of their nations seriously. It, in return, surges the valuation.
Global GDP and Dynamics
Before the COVID-19 pandemic started, you know the global GDP was blossoming. It was standing at $88 trillion. But as the coronavirus hit, the market started going inversely. The downward spiral caused a recession kind of situation in several parts of the world.
But now, as the vaccines are coming out in large numbers, the growth rate is going up in a ‘V’ shape trajectory.
Interestingly, in June 2020, the IMF (International Monetary Fund) projected the world GDP in reverse (-4.9 percent). It was 1.9 percent lower than the forecast in April 2020.
Lately, the IMF further scaled down the projection of global economic development by 5.4%. It was lower by 6.5 percent than it anticipated in January 2020.
As per 2019 reports, the United States covers around 24.42 percent of the global gross domestic product (GDP). It accounts for $21.43 trillion.
Japan is maintaining the third position($5.08 trillion, 5.79 percent) Germany stands in the fourth position ($3.85 trillion, 4.38 percent), while India is in the fifth ($2.88 trillion, 3.28 percent).
How Does a Beginner Start with Forex Trading?
A novice trader is often perplexed, nervous, and confused while trading in the foreign exchange market. And it is natural; you know it keeps the individual on toes and alert. The elements of complacency do not land a home in the hearts and minds of such traders.
But as time elapses, these factors ease out, and by then, the experienced market players begin to settle down in the market. It is both bad and good for them.
Good because it becomes a habit to be watchful and bad as sometimes it leads to overconfidence, which causes heavy losses in the volatile market. Hence, the balance of both factors is vital for traders.
Impact of websites
There is an aura of different websites that make people believe that either the forex market is too tough a task in hand or as easy as a cakewalk. But neither is true. You cannot earn a penny without enough knowledge; of course, fluke may work sometimes, and that’s an exception.
Putting the luck component aside, you require enough information, research, and education to get your biddings right on any platform.
So, do not get lured by what several websites commit or tell. They are playing with your sentiments. You have to be quite sure of what you are doing with the funds in hand. Take your time and read genuine reviews about reputed currencies like USD, EUR, GBP, CHF, and JPY.
See what suits your agenda, and then seek an expert’s idea. After calculating everything, go for the investment. It raises the probability of profitability to the maximum.
Thus, as one of the biggest secrets, it is not true that forex trading requires only money. You have to have traits like patience, garnering the latest knowledge, practice, and acknowledgment of errors for becoming a successful trader.
Too much optimism
There is a ratio that most novice traders tend to lose money. It may sound paradoxical to the previous argument. But there is a reason, which is volatility. No matter how cautious you become, the market fluctuation successfully dodges even the most learned participant. So, there is no chance for the novice trader.
Despite being wary, they are vulnerable because there is no substitute for an experience that teaches you to incorporate subtle things. And no matter what, the greed seeps inside, and the fraction of second into that takes profits away.
Notably, due to underestimating the market cycle, 80 percent of new traders lose out on their accounts. In the contrarian view, only 20 percent of traders utilize their brains to learn from their past mistakes.
So, too much optimism and pessimism are symptoms of losses. Try and take the centrist route and look at the minutest details. The aim of any form of trading is profit-booking; no one does it for fun. However, many traders are comfortable with the concept of forex trading compared to other financial markets and instruments.
Notably, the target that you set for the profit should be realistic; then, it is achievable. Also, it does not dishearten you when the market swings inversely. So, the question arises, what should be a minimalistic and possible aim.
After much consultation and observation, one can say that anything around five percent would be gettable as gains for every type of trader. It is a net profit for each month. If some trader is earning more than that in forex trading, that individual is an experienced campaigner.
Do not become greedy
However, it is not a secret that greed is the root cause of several troubles which invites mayhem and chaos. But the fact that controlling it requires nerves of steel gets ignored by everyone. You have to make up a limit of trading for each day. After procuring that much amount of profit, you should pack up and relax.
If you go for more, there are huge chances that you end the session giving up double the amount earned by you. Whatever you made should satisfy you; at least every gain is better than losing a penny.
It is a forex trading secret that no one pays heed to and then regrets later on. The currency market changes its movements in fractions of a second, even before you blink your eyes. It is so quick that it can change red to green and then red before you could understand the dynamics.
Also, some companies and people would try to offer you some superficial knowledge. Do not get attracted or feed attention to such elements. They may be frauds and can siphon off your funds. If such a situation arises, consult your seniors or someone who has more than a decade of knowledge of the forex market.
It is the greed that compels a trader to take an impulsive decision, which has no substance or backing behind to support the narrative.
Do not succumb to peer pressure
It is the most common mistake that almost everyone makes. If X friend is earning Y money, then we must also ape a similar strategy. It is a self-imposed peer pressure that traders apply to themselves. The idea hurts their sentiments because every circumstance is different.
With regards to earning proportion, predicting the forex market depends on several factors. Gauging them consumes a lot of time and days of monitoring. If your friend is gaining profits for a while, then ask the secret of their consistency.
More often than not, it is their willingness to be watchful of political movements, economic conditions, and world trades. These components drive the forex market up or down. However, it comes gradually. So, do not hesitate. Give yourself some time before elevating your ability to that level.
If you take a plunge in peer pressure, then forex trading is not your cup of coffee. The only companion guarding you would be losses.
Do not trust all brokers
Over the counter is the archaic way of trading the forex market. Now, with the widespread technology of the internet, people find it comfortable trading online. It is hassle-free and takes less than a second to place your bid. Furthermore, market players find it transparent because every transaction is visible. And brokers are a vehicle that aids in it.
However, not all brokers are trustworthy. There are instances when people have lost millions of dollars due to fraud forex trading. Hence, follow these guidelines:-
- Verify the broker with registration and license numbers.
- Check which authority is monitoring them. Such regulating authorities keep check on illegal activities.
- Also, not many know that offshore regulatory bodies can be worthless sometimes. So, be very attentive while you invest.
- Think of a situation; you become victim to a fraudulent practice and then try to contact the authority. But you’ll be surprised to know that no one would answer from the end because of the offshore problem. So, the chances of you getting justice in the case are quite slim.
- The brokers trading from the offshore licenses should also pursue European licenses or countries of their belongings. It establishes trust.
- Today, InvestBy, Etoro, FXtm are among the top brokerage firms and platforms that are fairing well.
Competition is high in the forex market. So, typical tricks or tips do not work effectively. You need to dig out secrets and hidden gems. If you know how brokers may work, and too much optimism or pessimism can harm your fortunes, you would commit lesser errors. So, being vigilant about the subtle thing is vital for successful earning and trading.