Many new traders are overwhelmed when they enter the FX trading market. When you first start FX trading it is important that you know what you are doing. Of course, this does not mean that you have to know everything about the market because that would be impossible. To trade on the forex market you need to decide on one currency pair and take your time with the trades.
Trading With One Pair
There are a lot of currency pairs that you can trade with. However, all you need is one when you start FX trading. There are a lot of expert traders who make all their money through trading with one pair. It is best that you use one of the major currency pairs to trade with when you start. These pairs have two of the most traded currencies in them.
It is best to use these pairs because they are easy to trade with, most brokers offer them and you can easily get the information you need. With other lesser known currency pairs you could have a problem finding information. The liquidity of the pair may also be a lot lower than these commonly traded pairs.
Which Pair to Choose
While it is good to know that you only need one currency pair you have to determine which one you need. The best way to do this is to consider the trading strategy you will be using. You have to consider if the strategy is a trend or range strategy because this affects the currency pair you use. There are some currencies that range more than they trend.
If you are looking for a trending currency pair then you should look at one that has the US dollar in it. The US dollar is considered to be a trending currency and it offer high volatility and liquidity. You need both of these things when you are trading with a trend.
Take Your Time with FX Trading
When you start trading on the foreign currency exchange you should not trade as much as you can. A lot of new traders think that they have to trade a lot to be successful. This is not actually true because when you trade a lot you increase the changes of creating a losing trade. Taking your time with the trade ensures that you have done all the analysis you need to and you are sure about the conditions for the trade.
It is important that you analyse the market before you open a trade with any currency pair. The first point you should look at is whether the market is trending or ranging. As you are only using a single currency pair you have to make sure you trade at the right time. A trend market will have a clear price movement in a single direction. A range market will have a ranging movement that stays within set support and resistance levels.
If the market conditions are ideal, you should use your technical or fundamental analysis to determine when to trade. You should only trade when you are given a clear indicator by your analysis method. This will ensure that you trade profitably and effectively most of the time and it will limit your losses.