10 Most Important Factors in Online Forex Trading
The booming online Forex trading market promises plenty of rewards, but also equally catastrophic pitfalls. It takes a combination of skills, knowledge, personality and experience to succeed in this business.
There are 10 important factors essential to online Forex trading:
1. Currency Exchange Rates Often Depend on Political and Economic Events
An investment bank declares bankruptcy in New York. A wave of insurgents ride into Tripoli in Libya and overthrow the dictatorial regime. A brutal terrorist attack cripples the economy of India’s financial hub, Mumbai. All these political and economic events can have deep ramifications on currency exchange rates. The Forex market is highly dependent on local as well as global issues and events. This makes this market unpredictable, but also extremely lucrative.
2. The World Today is Truly Global and Connected
Wall-Street sneezes, and the world catches an economic cold. Protests in a Chinese factory impact supply and demand in London and Paris. The global economy today is more connected than ever. The lines between local and global have been blurred. A Forex trader must learn to analyze all his decisions with the global economy in mind.
3. Picking the Right Broker is Important
Is your Forex broker regulated? What trading platforms do they use? Are they well capitalized and offer reasonable spreads? Is their customer service up to the mark? Picking the right broker is important to success in this competitive field. Make this first move wrong, and you could jeopardize all your online Forex trading endeavours.
4. Leverage is Your Greatest Strength
As a Forex trader, leverage is your greatest asset. It can help you make far more profits than you would otherwise. Some brokers often leverage as high as 100 to 1. Learn to utilize this leverage properly, and the doors to success won’t be locked too long.
5. Leverage is Also Your Greatest Enemy
At the same time, a poor understanding of leverage could also doom you to catastrophic financial loss. Always remember that leverage works both ways: it can help you make incredible gains, but also magnify your losses manifold.
6. A Little Bit of Luck Helps
As with anything else in life, luck plays a crucial role in your success. You could analyze every single piece of research and obsess over global politics, but you would still need the blessings of Lady Luck.
7. There are No Guarantees
The currency market is volatile and susceptible to change by the second. Some bets are safer than others, but there is never a ‘sure shot’ winner. There are no fool-proof guarantees in this business, and don’t let anyone tell you otherwise.
8. Cynicism is Good
Gullibility is the online Forex trader’s greatest sin. Do not believe anything without undertaking your own research and analysis. Remember: if it sounds too good to be true, it probably isn’t.
9. There is no Replacement for Hard Work and Experience
Beginners to online Forex trading often jump right in and incur massive losses on instinctual bets. As with any other investment field, there is no such thing as overnight success. It takes hard work, knowledge and experience to breach a certain level of success.
10. Losses Are an Everyday Part of the Business
When you are trading in as volatile a market as Forex, losses become an inevitable part of the business. You will lose on some bets, make huge gains on others. A good Forex trader is unsentimental about losses and learns to shrug them off as a part of the learning process.
