Having successfully embodied Ned Stark, Sean Bean now descends on trading grounds and explores the foreign exchange trading industry!
Watch the video to see what he has to say about trading.
Forex is a huge market that dominates all other financial markets. What does huge mean? $5.3 TRILLION traded each day! That is TWICE the size of the UK economy!
1. It’s the most liquid of markets
2. There’s no centralized exchange
3. It’s a 24-hour market
Your investment can be affected while you sleep, so don’t forget to use stop losses to control this risk! All markets show volatility and traders hoping for short-term profits may be exposed to it. Moreover, in an over-the-counter market regulatory oversight is limited and traders must investigate brokers’ trading practices.
Currencies are always traded in pairs made up from the base currency and the quote currency.
The 7 most traded and important pairs are the majors. All involve the USD in combination with the Euro, the Japanese Yen, the British Pound, the Australian Dollar, the Swiss Franc, the Canadian Dollar and the New Zealand Dollar.
Minors are the pairs that involve the three main non-USD currencies: Euro, Yen and British Pound.
You are trading two variables, both sides of the trade. When you buy GBP/USD you expect the Pound’s value to rise compared to the Dollar. When you sell the GBP/USD you expect the Pound’s value to fall versus the Dollar.
If the USD is strong and rising, we expect the USD/CHF, USD/JPY, USD/CAD pairs to be also rising and the EUR/USD, GBP/USD, AUD/USD and NZD/USD pairs to be falling.
A key concept of successful trading is to look for a strong currency that is trading against a weak currency. Remember, it is all relative.
The most important concepts to comprehend are spread, pips and lots.
The spread is the difference between the buy price and the sell price.
Pip is the unit that measures the smallest change in value between the two currencies in the pair.
Lastly, assets are traded in specific sizes or amounts called lots. One standard lot is 100,000 units, a mini lot is 10,000 units and a micro lot is 1,000 units.
Being able to read the charts is vital. Technical Analysts simply use them to predict what may happen in the future. Charts are great for finding Support and Resistance areas, identifying when trends begin and end and how long they last. Chart reading is a skill that should be learnt by any trader.
Almost anything can move the markets – news, sentiment, and gossip can all have an impact. Interest rates, unemployment, inflation, and company earnings also matter. FX pairs in particular can be key reflectors of the confidence about and within a country. It’s not only the hard economic data, but also fundamental news and sentiment that can swing markets around.
Following all these can be overwhelming but you can always focus on high-impact events.
Risk is everywhere in life and so it is with trading. You must manage and minimise your risk at all times with proper Risk Management. For many, the Number 1 trading rule is Trade only what you can afford to lose, so your losses will only be a small percentage of your account. A rule of thumb: don’t forget to use Stop Loss orders!
While understanding the basic concepts is vital, managing risk and an appreciation of technical and fundamental analysis will also help. However, you need an approach and strategy that fits you and your lifestyle. Emotional control is another key element when trading. If you don’t know yourself then you will find it hard to succeed. Spend some time understanding yourself and find the time frames or trading styles that best fit you.
The two key concepts that every trader must understand before placing a trade.
Leverage: The ability to control a large amount of money using very little of your money and “borrowing” the rest. To control a $100,000 trade, your broker will set aside $1,000 from your account which will be the Margin. The Leverage for this trade, which is always expressed as a ratio, will now be 1:100. Leverage is a double-edged sword and needs to be handled with caution.
Stop Loss Orders: Designed to limit the amount of money lost on a single trade, by exiting the trade if a specific price is reached.