Edge Forex

Category: Learn

  • Manage Stress as a Forex Trader

    Manage Stress as a Forex Trader

    Although some amount of stress is unavoidable in trading, it is a barrier that any trader who wants to be successful must overcome. Traders can trade in the currency market 24 hours a day, five days a week. As a result, they are bound to encounter risks and uncertainties on a daily basis.
    We also know that uncertainty is inversely connected to comfort levels — the more uncertain you are, the more uncomfortable you will feel, making you more prone to succumb to stress. Dealing with stress is thus something that all forex traders must do, whether we like it or not. 

    It attacks your reasoning, drive, focus, and mental condition as a trader as a negative emotion. However, if you can utilise it to your advantage by managing stress better than others, you are most certainly on the correct course.

    Have a plan

    When you don’t have a plan, you feel out of control, and that’s when tension sets in. Making a plan is a time-saving strategy that removes numerous sources of stress. Furthermore, having a strategy and a plan boosts your chances of success significantly. Your strategy should be based on your objectives, available cash, time horizon, and level of risk you are prepared to face.

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    Exercise – physically and mentally

    A decent full-body workout in the gym may be a great stress reliever. If you don’t want to go to the gym, there are many other options, such as jogging, swimming, yoga, or simply going for an early morning stroll. 

    You should train your intellect in addition to your body. This may be accomplished, for example, by playing games such as chess, which sharpens your thinking and allows you to devise superior strategy.

    Take breaks

    A few minutes away from the computer may do wonders for your stress alleviation, since gazing at charts and figures all day to discover that fantastic deal can be unpleasant. You may schedule these breaks and even set alarms to ensure that you don’t forget about them. 

    Without breaks, you’re more likely to make mistakes, which, as we all know, may be damaging to your trading performance. However, by taking a vacation and doing something entirely different, you may refresh your mind and return to forex trading with the laser-like focus that you require.

    Work on your self-confidence 

    If you don’t believe in yourself, no one else will, or at least it will appear that way. Lack of self-confidence leads to self-doubt, which may be a big impediment to your success – both professionally and personally. 

    You are more inclined to become indecisive if you begin to mistrust and second-guess yourself. To succeed, you must cultivate a more positive mentality, and one way to do so is to study as much as possible about your skill – forex trading.

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    Losses – not the end of the world

    You will win some, and you frequently have to lose some. You won’t be able to win every game, competition, or transaction. You may cope with a loss in two ways: you can let it pull you down and stress you out, or you can just embrace it, analyse it, learn from it, and avoid making the same mistakes again.

  • Risk Management: What are the Trader’s Worst Mistakes?

    All About Risk Management

    Here are four blunders you must avoid at all costs while trading:

    • Do not Invest without a proper strategy.

    Emphasizing the necessity of having a trading strategy is simply not enough. Trading without a strategy is nothing more than a game of chance waiting for a terrible outcome. 

    • Diversify your trading portfolio.

    One of the most crucial aspects of investing and trading is diversification. It indicates that you don’t invest all of your money into one item; it’s important to diversify your portfolio. However, while trading Forex, a large number of pairings are connected. Your transactions may appear to be diverse, but they really coincide and will proceed in the same direction. If your analysis is accurate, you could gain a lot of money, but if it isn’t, you could lose a lot of money. Make sure that the deals you make during the day are unrelated.

    • Going overboard after a few wins/losses.

    Even if you have a risk-management strategy in place, you may find yourself in a situation where you feel compelled to go all in. It can happen if you’re on a losing streak and try to win it all back, or if you’ve had several winning trades in a row and feel unstoppable. In any case, if you do not adhere to risk management, you are placing yourself in a position to lose a lot of money. Stick to your management approach no matter what. Taking a 1% risk every trade and a 3% risk per day is advised. 

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    • Risking more than one can bear.

    This blunder stems from the previous one. It’s simple: if you lose more than 1% of your account as a result of a stop-loss, your risk management is incorrect, and you risk losing your account. If you lose several times in succession, your deposit may be forfeited. 

    To reiterate, trading is not only an exercise in analysis. It’s also about how you operate when you’re under pressure. And how you act when you’re on the winning or losing end of the game.

  • Forex Trading: WHAT IS FOREX?

    Forex trading is a term used to describe people involved in the effective exchange of foreign currency, usually for the purpose of profit or financial gain. That could take the form of speculators, who want to buy or sell money for the purpose of profiting through the price movement of money; or it could be a fence aimed at protecting their accounts in the event of a breach of their financial position.


    The term ‘forex trader’ can refer to each trader in the trading platform, a bank trader using their institutional platform, or hedgers who may be carrying their own risk or withdrawing that activity from the bank or financial manager to manage the risk on them.

    The foreign exchange market, or forex (FX) for short, is a low-level market place that enables the buying and selling of various currencies. This happens over the counter (OTC) instead of the intermediate exchange.
    Unbeknownst to you, you may already be participating in the foreign exchange market by ordering imported goods such as clothing or shoes, or, more likely, by buying foreign currency while on vacation. Traders can be drawn into forex for a number of reasons, including:

    1. FX market size
    2. Different types of trading currencies
    3. A different level of flexibility
    4. Low transaction costs
    5. Trading 24 hours during the week

    TRADE OF PAIRS
    One unique feature of the Forex market is the way prices are quoted. Because money is the foundation of a financial system, the only way to extract money is through other currencies. This creates a harmonious equation metrics that may sound confusing at first.
    Forex trading in pairs gives the trader some flexibility, allowing the trader or investor to express his or her trading in the currency he or she feels most appropriate.

    Let’s take the Euro for example, and let’s say the trader has good intentions for the European economy and thus would like to make long money. But – let’s say this investor is also strong in the US economy, but bearish on the UK economy. Yes, in this example, the investor is not forced to buy the Euro against the US Dollar (which could be a long trade of EUR / USD); and, instead, they can buy the Euro against the British Pound (long EUR / GBP goes).

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    This gives the investor or trader that extra flexibility, which allows them to avoid ‘missing’ the US Dollar to buy the Euro and, instead, allows them to buy the Euro while they are short of the British Pound.

    CHURCH TRADE: BASE V / S COUNTER CURRENCIES
    One important difference of the Forex rate is the meeting: The first currency listed in the rating list is known as the ‘basic’ currency of the two, and this is the quoted asset. The second coin is known as the ‘counter’, and this is the standard currency, or currency used to define the amount of the first coin for the two.

    LET’S TAKE EUR / USD AS AN EXAMPLE

    The Euro is the first currency on the scale, so the Euro will be the primary currency in the USD / EUR currency pair.

    The US Dollar is the second largest currency, and this is the currency used by the EUR / USD quote to define the Euro value.

    So, let’s say the EUR / USD average is 1.3000. That would mean 1 Euro costs $ 1.30. If the price goes up to $ 1.35 – then the Euro would go up in value and, basically, the US Dollar would go down in value.

    If an investor was bearish on the Euro but strengthened the US Dollar, they could choose to ‘shorten’ the two, expecting prices to fall; after that they could ‘cover’ the trade by buying it at a lower price, and then put the difference in the pocket.

    TRADE OF CHURCHES
    In short, the foreign exchange market works like many other markets because it is driven by supply and demand. Using a basic example, if there is a strong demand for the US Dollar for European citizens holding Euros, they will exchange their Euros for Dollars. The value of the US dollar will rise while the value of the Euro will decline. Keep in mind that this transaction only affects the EUR / USD currency pair and will not, for example, cause the USD to depreciate in the Japanese Yen.

  • Basics of Trading Psychology

    Whether it is forex trading or any other form of trading which involves highs and lows, the trader’s mindset plays a vital role in his moves. Abrupt and instinctive decisions may not be fruitful in the long run as it is not a lottery. Proper analysis and strategy are required to become a successful trader.

    Every move in the forex market will either benefit you or prove to be a loss for you. It can be quite stressful to handle all ups and downs but if you are really into trading and want to make it work, you should set up your mind in that way.

    Trading psychology involves all the emotions that a trader experiences when he is either about to make a crucial decision or when he has gained or lost in the market. The most prevalent emotions that every person dealing in trading will experience are fear, anxiety, nervousness, and greed.

    Fear is a constant feeling when you are trading either in forex or in shares. You don’t know what the coming time is going to bring you. You may make a decision and would be frightened about the results. This may keep you away from making the right decisions and giving all that you have learned a try. So, it is important to overcome your fears and make stable and sensible decisions. In our perspective, a person fears something he is not good at or something he is not completely aware of.

    We suggest you completely know about all the basics, the tools of technical analysis, and the various strategies that can be deployed in the forex market. Once you are aware of all the possibilities of your moves in the market, you will automatically observe that the fear recedes away.

    There are times in the trading market when you have to decide in a very short time. You don’t get to think for some hours, it is a matter of some minutes. In that case, you encounter feelings of nervousness and anxiety. When we have to make decisions in a very short duration of time, it is possible that we make decisions without thinking properly or maybe very instinctive decisions. We cannot completely avoid this situation and we need to get used to it.

    A trader should keep an eye on the market and the trends even when he is not placing an order. If you know what has been going on in the market before and you are already predicting some things for the near future, it becomes easier to make decisions in a short interval of time.

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    Greed and excitement are the two emotions that will arise when you think things are going well and will continue to go on a high note for some time. You may want to make the most of the time and exceed your limits. This is a situation in which you need to handle your emotions and stop yourself from incurring huge losses. A trader tries to buy more and more in such a situation and forgets about the counter effects that can have on his account.

    To handle this emotion, a trader should put a limit on the number of pips he can afford to lose and stick to it. Whatever comes up, always stick to the strategy you have formed for the long run. Making huge profits at once is not a viable expectation and one should believe in shorter steps and consistent profit rather than abrupt and huge profits.

    Awareness of the pros and cons is very important for a good trader. Even an experienced trader loses money at some time or the other, these outcomes should not have an impact on the confidence of the trader. Uncertainty is an unavoidable part of the forex market. A good trader should be mentally ready to incur any loss.

    While you place an order, do the analysis and look at both sides of the coin. Estimate the amount of profit you may get and then estimate the amount of loss you may have to incur. Do not make instinctive decisions hoping that the things will turn in your favor only, the reverse can happen as well. So, it is better to prepare yourself for the loss and then make a move. Profits and losses are like the two sides of the coin in trading. A good trader remains mentally stable regardless of the outcomes of his trade.

    A trader who is new to the forex market is most likely to incur huge losses if they are not proceeding with caution. Prevention is always better than cure. Most of the people move into the trading area with the thinking that they will convert their $1000 into $1000000 anytime soon. Some may make the mistake of investing all the input they have at once. All this happens due to a lack of experience and ambiguity of the basics of forex trading. Blowing up all your account balance just to make one trade is a big no. Look for a reasonable and sensible strategy and its yields before you starting making purchases in the market.

    Along with the basics and trend analysis of the forex market, a trader should learn risk management as well. There are many risk management moves and strategies that one should know about and follow. Using stops and limits and familiarizing yourself with the concept of leverage may be a good start.

    If you are new to the forex market, we suggest you set up a demo account for a while and get a good grasp of the market before you start risking money. Stay updated about the news and events to make wise and informed decisions.