Currency Trading – Forex tips you should know
What is currency trading?
Currency trading is the most liquid and robust market in the world. In fact, no other market can compare to the sheer value of this massively traded market. Estimates peg the value of currency trading at around $5 trillion per day, a figure that far outstrips the value of all stock trading in the world. Currency trading / forex, is the largest market in the world that is almost 24/24 with the largest stock market volumes.
Read now the Best currencies/ Forex trading Guide for beginners in 2023!
What are Currency trading Pairs?
All trading consists of the trading of different forex pairs: the currencies of the different countries are exchanges in real time.
When trading on the exchange rate, one must know which are the best currencies as investment. To find the most profitable currency pairs for you, you will need to find your forex strategy, carefully choose the pairs and define the best times to trade.
When you start trading Forex online, you may find yourself overwhelmed and confused by the large number of major currency pairs available in your MetaTrader 4 trading platform. If you look at the minor currency pairs, you still have some bread on Plate.
Trading on Forex – or currency trading – is the buying and selling of forex currency pairs. For the purchase and sale of currencies, you must have information on how many currencies in the pair are worth in terms of each other. This relationship is what defines a pair of currencies. A currency pair quotes abbreviations of two currencies followed by the value of the currency in the base currency.
There is an international code that specifies the configuration of forex pairs. For example, a quotation like 1.23 EURUSD means that one euro is worth $ 1.23. Here, the base currency is the euro and the opposite currency is the US dollar. Thus, each currency pair is listed in currency markets around the world. The price of one quotation gives the price of the first currency in the second. The name of the currency pairs comes from the first two letters of the country in question and the third letter is given by the letter of the currency. For example: USD – United States Dollar.
Currency trading exchange rate values
The prices of the forex pairs fluctuate in real time, as trading volumes between the two countries change every minute.
These pairs are naturally associated with countries that have financial power and countries with a high volume of trade conducted worldwide.
Generally, major pairs are more liquid and – consequently – less volatile, meaning that price fluctuations within the day may lower, since a large number of Australian traders implies a harder-to-change consensus regarding the asset’s value.
5 Forex Tips for Beginners to Avoid
Forex trading can be a minefield for the uninitiated. The world’s most actively traded market dwarfs the total value of stocks trading by a long margin, excuse the pun. There is a misconception that greenhorns are susceptible to forex trading errors, while experienced forex traders aren’t. Sadly, mistakes are made by all. A solid grounding in forex trading practices can certainly yield benefits down the road. Whether it’s emotionally-based trading mistakes, abnormal market developments, or a lapse in judgement, trading errors do occur even with the best of us. It’s important to internalise these forex trading tips, and not to get disheartened by losing trades. Everyone makes mistakes from time to time. We can all agree that it’s particularly foolish to do something to your detriment, but not every forex trade presents as a risk. Many traders actually believe that their buy and sell decisions are the right ones, at the time. To better equip forex traders with the requisite tools, knowledge, and insights, AvaTrade Australia has compiled a list of 5 forex potholes for beginners to avoid:
Never Risk More Than You Can Afford to Lose
This is the golden rule of all trading activity. It’s important to limit all trading activity per position to no more than 1% – 3% of your available capital. If you have $10,000 available, no single forex trade should be more than $100 – $300. That way, you can hedge against a market downturn if trades turn against you. Stick to this rule, and you will protect your bankroll.
Education in Forex Trading is Sacrosanct
Many traders believe that you’ve simply got to get a feel for the forex market in order to be successful. Unfortunately, that feeling is often misguided, and based on emotional knee-jerk reactions to market mechanics. A forex education is indispensable when real money is involved. Learn what a solid trading strategy actually means. This incorporates technical and fundamental analysis, reading Forex guides, listening to forex tutorials, attending forex webinars, and copy trading via powerful trading platforms at AvaTrade Australia. Paper trade with a viable strategy too. All of these tools and resources are designed to boost your understanding of the forex market.
Always Use Stop Loss Orders When Trading Forex
It’s easy to forget that stop loss orders should be implemented on all forex trades. But this is one rule that should never be forgotten. A stop loss is a risk mitigation tool that you can actually control. Set stop loss orders on every trade that you open. The moment you enter a position, set a stop loss. It’s foolhardy to simply tell yourself that you will exit the trade once a certain price point is reached, since it becomes difficult to manage multiple trades simultaneously, in real-time. Nobody knows with any degree of certainty which way the market is going to move, particularly with volatile currency trading. Set stop loss orders on all your trades here at AvaTrade Australia. You won’t regret it!
Keep Your Eyes on the Price
It’s easy to enter a trade, and then go about your business, forgetting that the market is actually a dynamic entity with ever-changing elements. It’s important to stay focused on your open positions. Often, major market events will take place, and these have the capacity to influence the direction of your trading activity. Economic indicators, news releases, and other geopolitical events have the ability to derail trades. Stay abreast of the latest developments as much as possible.
Do Not over Trade
New traders are susceptible to overtrading. While the markets are a hive of activity, there isn’t always a need to open too many positions simultaneously. Sometimes, market news warrants the opening of multiple trades, and at other times it doesn’t. If there are slower trading days, it’s better to reduce the number of trades. When volatility kicks in, you can increase the number of trades you make. Your goal in all cases is to minimise your exposure to risk. If you can identify opportunities in the market, enter a trade and stick to a well-formulated trading strategy.
How to analyze currencies?
Let’s take a detailed look at EURUSD – This can be considered one of the most liquid currency pairs. In addition, this pair has the lowest spread, at most Forex and CFD brokers. This pair of currency is associated with a basic technical analysis.
The best thing about this pair of coins is that they are not too volatile. If you are not in a position to take a lot of risk, you can think of choosing it as your best pair to trade without worrying more than that.
GBPUSD – Spreads and gaps contribute a lot to the popularity of this pair of currencies.
However, you must keep in mind that higher profits come with greater risk. It is a currency pair that can be grouped into the volatile category.
You can also find a lot of information on this Forex pair, which can help you prevent yourself from making Forex beginner mistakes.
However, many Australian traders prefer to choose it as their best currency pair to trade since they can find a lot of market analysis information.
USDJPY – this is another loved currency pair that can be seen in the world of forex trading.
It is usually associated with low spreads and you can usually follow a smooth trend when compared to other currency pairs. It also has the potential to deliver profitable opportunities for Australian traders.
All major currency pairs that can be found at forex brokers with very competitive spreads. However, this fact is not applicable for the GBPUSD because of its volatility. It is always better to stay away from currencies that have large spreads.
The recommended extended by trading experts is 0-3 pips. When he overcomes 6 pips, the trading pair can become too expensive, which can lead you to bigger losses. it does not mean that you should totally avoid anything that has high broadcasts.
Are minor currency pairs are the best currency?
The minor currency pairs:
- EURAUD – euro against the Australian dollar
- AUDJPY – Australian Dollar vs. Japanese Yen
- GBPAUD – British Pound vs. Australian Dollar
- EURNZD – euro against the New Zealand dollar
- NZDJPY – New Zealand dollar against the Japanese yen
- EURGBP – euro against the pound sterling
- EURCHF – euro against the Swiss franc
- EURCAD – euro against the Canadian dollar
- EURJPY – euro against the Japanese yen
- GBPJPY – British Pound against the Japanese Yen
- CHFJPY – Swiss franc against the Japanese yen
- CADJPY – Canadian dollar against the Japanese yen
- GBPCHF – British Pound against Swiss Franc
With more than 200 countries in the world, you can find a handful of currency pairs for trading. If you want to know the currency symbols in circulation, see our article – Forex symbols.
All of these currency pairs do not have the potential to deliver the best results to Australian traders.
Minor currency pairs are interesting to trade if you are a fundamental trader,, and you do a longer term analysis.
Scalping on minor currency pairs is more complicated to do because entry fees are higher than for major currency pairs. This does not mean that there are no more profitable currency pairs among minors.
The most volatile currency pairs can be profitable if one is well aware of risk management and an effective trading plan.
If you want to invest successfully currencies pairs in forex trading, you must have a better understanding of the pair you trade. If you choose any of the pairs, you go right into the wall.
Choosing the most profitable currency pair for you should be based on your knowledge, trading strategy and availability.
AvaTrade Australia currency pairs
|EUR-USD||Euro against US dollar|
|GBP-USD||Pound sterling against US dollar|
|USD-JPY||US dollar against Japanese Yen|
|EUR-JPY||Euro against Japanese Yen|
|AUD-USD||Australian Dollar against US dollar|
|EUR-CHF||Euro against Swiss franc|
|EUR-GBP||Euro against Pound sterling|
|USD-CAD||US dollar against Canadian dollar|
|USD-CHF||US dollar against Swiss franc|
|NZD-USD||New Zealand dollar against US dollar|
|AUD-JPY||Australian Dollar against Japanese Yen|
|GBP-JPY||Pound sterling against Japanese Yen|
|EUR-CAD||Euro against Canadian dollar|
|EUR-AUD||Euro against Australian dollar|
|AUD-CAD||Australian Dollar against Canadian dollar|
|AUD-CHF||Australian Dollar against Swiss franc|
|AUD-NZD||Australian Dollar against New Zealand dollar|
|CAD-CHF||Canadian dollar against Swiss franc|
|CAD-JPY||Canadian dollar against Japanese Yen|
|CHF-HUF||Swiss franc against Hungarian Forint|
|CHF-JPY||Swiss franc against Japanese Yen|
|EUR-DKK||Euro against Danish Krone|
|EUR-HUF||Euro against Hungarian Forint|
|EUR-NOK||Euro against Norwegian Krone|
|EUR-NZD||Euro against New Zealand dollar|
|EUR-PLN||Euro against Polish Zloty|
|EUR-RUB||Euro against Russian Ruble|
|EUR-SEK||Euro against Swedish Krona|
|EUR-TRY||Euro against Turkish Lira|
|EUR-ZAR||Euro against South African Rand|
|GBP-AUD||Pound sterling against Australian Dollar|
|GBP-CAD||Pound sterling against Canadian dollar|
|GBP-CHF||Pound sterling against Swiss franc|
|GBP-HUF||Pound sterling against Hungarian Forint|
|GBP-NZD||Pound sterling against New Zealand dollar|
|GBP-SEK||Pound sterling against Swedish Krona|
|GBP-SGD||Pound sterling against Singapore Dollar|
|NZD-CAD||New Zealand dollar against Canadian dollar|
|NZD-CHF||New Zealand dollar against Swiss franc|
|NZD-JPY||New Zealand dollar against Japanese Yen|
|USD-DKK||US dollar against Danish Krone|
|USD-HUF||US dollar against Hungarian Forint|
|USD-MXN||US dollar against Mexican Peso|
|USD-NOK||US dollar against Norwegian Krone|
|USD-PLN||US dollar against Polish Zloty|
|USD-RUB||US dollar against Russian Ruble|
|USD-SEK||US dollar against Swedish Krona|
|USD-SGD||US dollar against Singapore Dollar|
|USD-TRY||US dollar against Turkish Lira|
|USD-ZAR||US dollar against South African Rand|
|USD-ILS||US dollar against New Israeli Shekel|
|EUR-ILS||Euro against New Israeli Shekel|
|GBP-ILS||Pound sterling against New Israeli Shekel|
|USD-CLP||US dollar against Chilean Peso|
|USD-CNY||US dollar against Chinese Yuan|
It is often advisable to consider trading pairs that contain your local currency. In most cases, your local currency pair will be quoted against the US dollar so you should stay informed of this currency too.
Currency trading main FAQs
- What is the best currency trading strategy?
There is no best currency trading strategy. The strategy that works best will change based on the market or currency you’re trading, the timeframe you’re trading, and your own personality. Plus, what works this month might not work as well next month, so currency trading is ever changing. You should learn as many strategies as possible and focus on a single currency until you are an expert before spreading yourself too thin.
- How much money do I need to start with currency trading?
At AvaTrade you can get started on a career currency trading with as little as $100. That said, don’t expect to get rich overnight or even over years if you’re starting with such a small amount. To make large amounts of money in your trading you need to have large amounts to speculate with. Of course, only you know what you can afford to lose, and as they always say never risk more than you can afford to lose.
- What is the difference between currency trading and commodity trading?
The primary difference is that when trading commodities you are speculating on the price moves of physical items such as gold, wheat, cocoa, crude oil and others. Currency trading is speculating on the relative value of one country’s currency versus another. Because commodity trading deals with actual physical items some people feel more comfortable trading commodities, or understand what makes their prices move more easily than with the more abstract currency markets.
Open your currency trading account at AvaTrade or try our risk-free demo account!