Forex is a popular online money-making industry where people can easily make money by selling and purchasing currency. This is a potential industry where millions of transactions are taking place every day. Some people want to start their careers in this market because they want to be independent, while others want to earn more money.
However, a problem arises when people are unable to differentiate between good and bad choices. Since they are beginners and don’t have adequate knowledge about the industry, so they don’t know which is the best choice. Here, we will provide you with a complete guideline to beginners so that they can have strong basic knowledge.
Improving of basic knowledge
There are a few things that create confusion among newbies, and we will cover most of them here.
Timeframe indicates the duration or holding period you should have before selling a currency. It indicates whether a trader retains the purchased currency for a shorter or longer duration. There are two different types of timeframe –
Lower timeframe: In this timeframe, the currency is held for anything from a few seconds to a few hours. This is stressful for beginners, and traders must be efficient when using technical indicators to predict the movement.
Higher timeframe: In this timeframe, the currency is held for a longer duration, which may range from days, weeks to months. In this comparatively relaxing timeframe, the investors need to use fundamental indicators like economic recession, growth, interest rates, inflation, GDPs, CPI, and so on. In order to learn about major economic events, you can visit a reputed broker’s website. Read more about the fundamental factors at Saxo and enhance your skills.
· Trading style
After choosing the timeframe, the next confusion arises when it is about choosing the trading styles. There are various different types of trading styles, these four are the most popular.
Position trading: Position trading is a long-term trading style in which, an investor needs to hold the purchased currency for a longer period of time. In this style, beginners use fundamental indicators because economic factors are considered as the main indicators of this style.
Swing trading: This is a long-term trading style, but you can use it as a short-term style. The duration ranges from a day to few more weeks. In this strategy, newbies have to wait for a swing to execute his deal. For successful execution, you need to use both fundamental and technical indicators. Swing trading is considered comfortable for more advanced newbies.
Day trading: This is a short-term trading style, and the individual has to execute the deal within the same day. To be a day trader, you must be efficient with technical indicators because the duration will make the situation stressful. However, one may also get benefits from it. For example, one can have more opportunities to enter trades.
Scalping: This is similar to day trading, and the duration is extremely short (ranging from a few seconds to a few minutes). This trading is of a very short duration which makes the situation extremely stressful because investors need to make the right decision within a very concise period of time, and many novices find this too hard.
· Method of analysis
There are two major ways to analyze the chart.
Fundamental analysis: This analysis is comprised of the fundamental indicators, including interest rates, inflation, GDPs, economic growth, CPI of a state. This analysis seems easier to novices compared to the technical analysis. Since the indicators are related to each other, a newbie can predict the upcoming condition easily.
Technical analysis: In this analysis, the trader needs to be efficient in using different technical indicators like moving average, momentum, relative strength index, histogram, parabolic SAR, and so on.
Finally, every Forex beginner should choose a lower timeframe, position or swing trading style, and do fundamental analysis at the beginning of their trading careers. These will reduce the level of stress and allow them to trade happily.