High leverage helps an investor to execute the trades with higher volumes in different assets. It provides the opportunity for the highest profit with the lowest investment. But this can be the reason for a big loss from a small amount of movement in the market. There are so many features of the CFD market which we should be careful about from the beginning. Today, we will discuss some of the most important factors you need to study as a new trader.
The Forex market is so enormous and liquid. High liquidity facilitates an investor to trade different types of currencies. Trading can be done at our convenience as timing is not so fixed here. Varieties of currencies are accepted here as sellers and buyers join this market from anywhere in the world. This market is always in a liquid condition as Forex is active for 24 hours and only closes at weekends.
Starting as an FX trader does not cost much money compared to the futures market, trading options, or stocks. Some brokers are offering “micro” or “mini” trading accounts with a minimum $25 deposit. An individual with less capital can get access to this giant platform to execute trades.
Participants in the Forex market
Millions of online participants around the world are executing their trades in this giant market. These hundreds of thousands of people are mainly bankers, money exchangers, fund managers, and individuals like us. But things are changing fast and normal people like us can join retail trading industry with great ease. Visit this link and enhance your knowledge. Soon, you will realize trading is not limited to elite people in our society.
The CFD trading industry includes millions of participants. Every day thousands of participants are joining the market and maintaining a specific timetable can be daunting.
Trading hours are divided into four major sessions, and those are the New York session, the Sydney session, the London session, and the Tokyo session. The timetable might vary according to the summer and winter seasons.
The actual closing and opening of the Forex market depends on the local business hours. Two sessions can be opened at the same time, sometimes. A greater volume of trades arises if two different regional markets open at the same time.
Stop profit order
If an investor does not set a stop profit order, the trade can take a sudden downtrend and make him a victim of double loss according to his lot size. Successful investors set a stop profit point in advance so that their trades will be closed automatically after reaching the expected profit goal.
Carelessness, in setting up this technical option, may destroy your career as a trader. The point should be set near to move average as greed for much profit may ruin our FX account by making the balance zero. Experts do not change their stop profit point randomly and keep a target point to gain profit.
A stop-loss order helps to close the trades when it reaches a certain loss point in a bearish market. Greenhorns change the stop loss point continuously and fail to come to a fixed goal. It is such a nuisance activity that is strongly prohibited by experts. Having a good grip in stop-loss order helps to maintain a risk management system in advance.
Risk to reward ratio
Before executing trades, one should consider the perfect risk to reward ratio to sharpen his trading strategies. An ideal risk to reward ratio is 1:3, which explains that we should not take more than $1 of risk if our investment is $3.
At the bottom line, it can be mentioned that Forex is a giant platform, and it has a longer learning curve. But these are the most crucial points which must be mastered before buying financial instruments; otherwise, beginners will never gain success.