The foreign exchange market nowadays is flooded by Bitcoin, Ethereum, Ripple and a thousand other cryptos. However, the relevance of traditional currencies such as the U.S. dollar or the euro cannot be denied. But are they even profitable anymore? Let’s find out.
How to Make a Profit
It’s no secret that most people nowadays are more interested in cryptocurrencies, the new virtual cash of the 21 st century. Even with their recent price plunge, a lot of young traders and seasoned pros alike are still talking about it. But making money from traditional forex still is and always will be an important opportunity on the market. Here are three tips to help you do that.
1. Know What and When to Trade
There are eight main currencies which produce major movement on the foreign exchange market. By now, you should be familiar with at least half of them. They are the European Euro (EUR), the U.S. Dollar (USD), the British Pound (GBP), the Japanese Yen (JPY), the Australian Dollar (AUD), the New Zealand Dollar (NZD), the Canadian Dollar (CAD), and the Swiss Franc (CHF).
They are exchanged in pairs. One of the most widely traded pairs is EUR/USD, which means that more than one time of day is ideal for exchanging them. However, in the case of unique pairings, you will need to ensure that their markets are open so that trades are active and potentially profitable.
2. Vary Your Market Analysis
The best way to look at the bigger picture and arrive at an informed conclusion is by applying varied methods of analysis and weighing in the results you get. There are three main ways of doing this on the forex market, and they are as follows:
A. Fundamental analysis. The market is influenced by fundamental economic factors. These include a country’s interest rate and gross domestic product (GDP), as well as revenues, expenses, and equities for the stock. By accounting for all of these, you will be able to make according to predictions and gather some gains.
B. Technical analysis. It is a backward-looking methodology that analyzes the context surrounding a stock. The focus of this process are charts and comprised historical data, which are usually provided to you by the software you use. This is why using the best forex platform available is essential.
C. Sentiment analysis. By getting a feel of the market and reacting to the direction in which other traders seem to be committed, you can either go with the flow or against it. Sentiment analysis is seldom used by calculated traders because it is a very subjective approach that relies on your personal grasp of various situations.
3. Learn from Past Mistakes
Learning from past mistakes is the best way to ensure that you will make a sure profit in the future. The most suitable approach that will allow you to see what worked and what didn’t is keeping an activity report. Your detailed entries need to contain the date, time, profits or losses, position of entry and exit, and strategies surrounding each trade action you engage in.
By going over it every now and then, you will know exactly what needs improving. Remember that even big-time players in the forex game sometimes lose. The important thing is to learn from every experience, be it negative or positive so that you can manage your risks better in forthcoming actions.
If anything, trading traditional currencies is a better way to make money than by jumping on the crypto bandwagon. Even when they’re at their most volatile, their values are still stable, and they rarely plummet in the way in which Bitcoin just did. Thus, with a bit of strategic knowledge, you can turn a profit in no time.
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