Home Financial Trading Blog A guide for beginners in currency trading

A guide for beginners in currency trading

forex trading

The foreign investors in the UK have managed to do something remarkably good out of Brexit. The annual performance of Natixis Global Asset Management, the global portfolio barometer, has on average increased by over 13% in terms of UK portfolios with significant non-sterile assets.

Even US investors have managed better when they came to a second place globally with an average return of 8.2 percent.

What is interesting, however, is that a large part of this above-mentioned success resulted in the currency crisis, with currency-related returns that outperformed the underlying equity markets.

Research Director at portfolio research by name Matthew Riley mentioned the following argument: “The exchange rate is an essential part of the explanation of whether we look at exchange rates. Since 2016 was highest since 2008, this had a major impact on the surveyed portfolios.”

He also provides as an example that a British investor with indefinite US equity exposure (in other words, without compensating for risk mitigation) would have received an additional 19 percent return in 2016 due to the depreciation of the pound against the dollar.

“The euro area shares would have been around 16%, Japanese shares around 23%. Currency effects are also seen in distribution funds, EM debt and high yield funds, which are often not secured by advisors.”

He continues to explain as follows:
“That the currency-related returns were more than the devaluation rate on the underlying stock markets when it comes to shares. The truth is that when we look at currency effects, about 7 percent
of the return contribution to the UK’s advisory portfolios. This means that 50 percent of the total return 2016 came from currency risk. ”

Clearly, there is money to create trade currencies.
But unfortunately, the new traders on the market are facing many confusing options, platforms and technologies. Therefore, here’s an overview below.

forex trading

Who is trading?
Many people! Forex is the world’s most traded market, as you probably already know, and our exchange rates are primarily known as forex. There is an average turnover of over
$ 5.3 billion each day according to vityIndex. Do you know how much pound it is at this writing time? 4.24 trillion of pounds, although it can be seen as they can change.

The spread of the internet has given us the opportunity so that many different people can trade. It can range from business to part-time traders. You can even do it in your bedroom using the internet nowdays, literally everywhere.

What drives currency movements?
I guess that you already know that currency values ​​are changing, which also means that exchange rates are changing. The changes in these prices are determined by a large number of traders buying currencies with other currencies. They are assessing what each is worth in relation to each other.

News and global events affect prices, which means that prices can change incredibly fast.
As a trader, we look at key factors, as well as political and economic stability, monetary policy, monetary policy, but also natural disasters.

How does it work?
Currencies come in pairs in Forex Trading. Such as; Sterling / US Dollar.
As a trader, you should predict how the exchange rate between the two currencies will change. Suppose the nutritionist thinks that US dollars will be stronger against the pound. Then they buy dollars, which means they also dampen their pounds.

If they have chosen correctly, the value of their currency increases. That means they can sell for profit. If, on the other hand, they “guess” wrong then they lose.

The GBP / USD rate shows how many dollars a pound can buy.
Let’s say that the trader believes that the pound will increase and be stronger against the dollar, as the trader uses dollars to buy pounds. If the exchange rate begins to rise, the trader can sell the pound and get a return of profit.

Since the market is open 24 hours a day, no matter where you are in the world, this is a major reason why Forex trading is so popular with just hobby traders.

Can i make money out of trading?
It is risky in the forex industry. Many commentators argue that the idea that an individual can reliably predict the movements of currencies is nonsense.

In addition, there is an abundance of platforms, guides, books and investment guidance that suggests that it is possible to make profits. Going in and reading forums there are lots of bedrooms Forex traders lose money day after day.

It can be very expensive to do currency transactions and individual business owners usually do not have enough effort to do anything but small profits. It is incredibly important that traders do not invest in money that they can not afford to lose.

What next?
It is important to remember that if you enter forex trading and want a return that it is an extremely complex area. It requires extensive reading and knowledge as it is full of risks.

Of course, there are stockbrokers and financial advisors available to discuss standard investment and the various risks. However, as an individual trader with Forex, it is usually self-learning that is also is filled with risk.

Our advice is that before doing any kind of online trading, it’s a good idea to spend time reading more and talking with other investors. It is important to be aware that books, guides or guides who promise big discounts may not be quite honest about the risk level. Important to find a credible source and find ypur own strategy that works.

When you feel ready to start you will find the best platforms here.
Good luck!

Trading platforms