The 2016 US Presidential elections have come and gone. To the world’s shock and horror, Donald Trump won the elections. This news sent the financial markets into a tailspin, causing traders to move their investments into safe-haven funds as well as hedge stocks. The markets then recovered some of their losses; however, they continue to be very volatile and strongly influenced by any global political murmurings.
As time passed, investment brokers and the world at large calmed down allowing the financial markets to recover some of their losses; nonetheless, the volatility remains. Added to this, because of the inherent liquidity of cash, the Forex trading markets remain the most volatile of all the financial markets, resulting in the need for caution when considering the option to trade Forex.
How wise is it to trade Forex online?
This beg the question: How wise is it to trade Forex in our current politically and economically unstable climate? Unfortunately, this is not a challenge unique to a single currency or country. Because of the rise of the internet and O, the global volatility affects all currencies. The only difference is that it affects some currencies positively and others negatively.
What is Forex trading?
Before we answer this question, let’s take a look at what trading Forex online entails. According to the Investopedia University, “The foreign exchange market… is one of the most exciting, fast-paced markets around. Until recently, forex trading in the currency market had been the domain of large financial institutions, corporations, central banks, hedge funds and extremely wealthy individuals… now it is possible for.. investors to buy and sell currencies easily with the click of a mouse through online brokerage accounts.”
Forex trading strategies
If online traders read the volatility in the Forex market correctly, it is possible to trade successfully; however, caution is required. Experts recommend that you develop a solid trading strategy and stick to it before you start trading. Here are three tips in order to help you work out your trading strategy:
- Decide which position you are going to take
A trader can take three positions – short-term, medium-term, or long-term. In a nutshell, this essentially means that a trader needs to decide whether he is going to buy a certain currency and at what point he/she is going to sell it.
- Decide which currency pairs you are going to trade in
You need to sell one currency to buy another currency. Currencies are always divided up into pairs. For example the GBP-USD is a currency pair. In this case the British Pound is the commodity and the US dollar is the currency that you will use to buy the GBP.
Establish your exit point
You need to decide at what point you are going to sell your commodity. For example, if your position is gaining ground or making money, at what rate will you sell or cash out? On the other hand, if your position is losing money, at what rate will you sell and cut your losses?
These three tips are just a start to help you develop a solid trading strategy. It is vital that in order to successfully trade Forex in today’s volatile and unstable climate, you need to ensure that your trading strategy includes well thought-out stop losses and limits. This will help you safeguard your investments and prevent you from losing money.