Choosing A Currency Pair To Trade
If you are looking for currency pairs with high liquidity, then EUR/USD is on the top of the list. It also has very high stability and the most popular pair among traders. It is good especially for a forex newbie, because of its high liquidity and stability.
Also, any major pair with USD in it has a lot of liquidity and very popular. So, we would say that these are the best currency pairs to trade:
EUR/USD
USD/JPY
GBP/USD
AUD/USD
USD/CHF
USD/CAD
But make sure you don’t place too many trades in the pairs with USD all at once. If the price goes against the direction you want it to go, then all of your trades will be a loss.
Also, you need to experiment with various pairs to see which pair works the best for you. The ones that we have listed above are the best because of their liquidity and stability. But that doesn’t mean that they are going to be profitable than the others.
One of the strategies associated with choosing a currency pair is combining strong and weak currencies to maximize your potential profits. If an analysis shows that GBP is going to increase in value in the upcoming week, you can couple it with another currency which is going to decrease in value. This will increase your chances of getting profit.
If you are a beginner, stay away from exotic currency pairs like EUR/TRY, USD/SEK, USD/NOK, USD/DKK etc… These currency pairs are not tracked by market analysts as much as the popular pairs. They have very thin volume, large bid-ask spread and require high transaction cost. So, trading these pairs can be risky and challenging.
The Most Common Pitfalls In Forex Trading
You need to know about the wrong ways to trade before you find out the right ways. Why do you think more than 90% of Forex traders lose money? Because they are usually the victims of the following common pitfalls
- Risking more than 1% of the capital.
- Trading immediately after the news.
- Trading just before the news.
- Not using stop losses.
- Trading without a trading plan.
- Risking too much in a single trade.
- Trading too often or taking too many positions at once.
- Moving your stop loss in the direction of a losing position to avoid being stopped out.
- Not managing emotions such as greed, fear and impatience.
- Having unrealistic expectations.
Become A Millionaire By Trading Forex – Is It Possible?
If you are willing to go through the long road to success in Forex and have enough patience, then ‘yes’… But that is not what is actually happening. Most of the Forex traders lose money and those who succeed get a reasonable profit from Forex.
Even then, it would be unrealistic to say that Forex makes you a ‘millionaire’.. Because you need a good capital to have a good profit. So, you have to be already rich so that you can invest enough money and get more money out of it…
One can make anywhere between a few dollars to millions. It really depends on the capital you have and the lot size. There are big companies who participate in Forex trading who make millions of dollars.
But for a starter who is starting with a balance of $1000 or even $100, it can be challenging. Losses are unavoidable and beginners are likely to see even more losses which sometimes even swallow up the entire capital. That is why it is very important to get proper education and experience.
Once you get experienced and have learnt everything necessary, it is possible to get a decent income in Forex. Many people make a living from Forex by being full-time traders.
So, can Forex replace your job? Yes, if you make a reasonable investment of capital, like $20,000. But you must already be an experienced trader, have a good trading plan and be good at risk management.
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