5 important things for Forex beginners to know

The world of investing is a vast and dynamic one, and features plenty of opportunity beyond traditional stock market ventures. The forex market in particular is one alternative avenue some people take when looking to trade for gains.

While it can rightly be described as being somewhat simpler than the stock market, however, the forex category can be complex and intimidating also – which is why we thought we’d present some tips that any beginners in this market ought to take note of.

Bear these things in mind and you’ll be off to a good start in the world of forex.

1. Global Tensions Can Have An Effect

International political matters can influence the market considerably, so it’s always important for a forex trader to pay attention to any turmoil or tensions between influential nations around the world.

Indeed, a recent Goldstreet Business post mentioned that the U.S.-China trade war could have an effect on China in the forex market. The point in that piece was the effects this could have on African economies, but it’s also an example of how international policies can alter the forex landscape in general.

So, to put things simply, it’s generally wise for someone active in the forex market to pay attention to geopolitics.

2. Different Trading Strategies Can Work

Naturally when you start a new kind of investment, you want to start off with a proven strategy that will give you the greatest chance of growing your investment. But if you’re doing research looking for that strategy and you’re finding conflicting advice, it may be because many different approaches can work.

In FXCM’s introduction to forex, it states that exchange rates are fluctuating continuously. This means that the typical “buy low, sell high” strategy can work, but the constant movement – and the ability to “sell” a currency pair, which is to say bet against a currency – means that there are various approaches that can result in profits.

3. The Market Is Always Open

In the world of forex, there aren’t open and close hours like you may be used to from trading in a regular stock market; there is no closing bell at the end of the day. This is so because currency pairs are being traded somewhere in the world at all hours, and thus there would be no appropriate time for the market to close (even if it were regulated by a single entity – which it is not). This means that you can essentially take action with your forex portfolio whenever you want, save for weekends – though there are more active times for different currency pairs.

4. Charts Are Invaluable

Whether you study charts on the weekends when the markets are closed, or any other time, they can help you see trends that you might miss otherwise. Putting it another way, numbers on a page don’t always mean as much as a visual depiction of them can. A graph or chart can show you not just where currency values have been at various recent times, but what long-term movements may be indicative of future movements. This is true of trading more broadly to some extent, but many will swear by chart patterns’ specific predictive nature in forex (which, keep in mind, doesn’t mean any one pattern makes for a guarantee).

5. Currency Pairs Exist In Tiers

Currency pairs have majors and minors, as well as exotics. These are terms that essentially serve to differentiate the pairs according to the power of the currencies involved. Majors are any pairs between the U.S. dollar and another significant world currency.

Though reports from Reuters indicate that the U.S. currency reserves have dropped of late, the dollar remains the leading reserve currency, and is thus involved in all majors.

The minors, meanwhile, are mostly the pairings between the various currencies attached to the dollar in majors. Exotics pair some smaller, emerging currencies (such as the Turkish lira or South African rand) with the bigger currencies from major or minor pairings.

Don’t worry if it all seems a little foreign to you. As you explore some of these concepts and tips, you can learn the ins and outs of forex trading fairly quickly. It’s still challenging, but a firm understanding of the basics is always the best place to start.