Forex trading can be a complicated area for beginners and experienced traders due to its complexity. Like any other investment area, the lighter you consider it, the lighter your pocket will weigh.
Forex trading investment plans usually imply long-term position trades where traders plan to invest in some currency and hold trades for several weeks or months. However, there are many ways for strategizing forex trading investment plans like tracking trade trends, day trading, or looking for fundamentals in trading; a trader can mix and match to attain investment targets. In practice, traders can have a long-term goal or be a frequent day trading in currencies or indexes.
In a broad look, investing in forex for beginners implies deposit money at forex brokers, start demo trading, learn from books technical and fundamental analysis, and then trade on live accounts.
It all depends on your knowledge, skills, requirements, and willingness. Here are a few strategies to invest in forex for beginners.
The best forex investment plan
One of the best forex investment plans is when traders trade on several accounts. For example, the trader will use one long-term trading account (positions a few weeks to a few months), accounting for swing trades and day trades. In both accounts, traders will manage a small amount of money and add more money in the future if the trading performance is satisfactory. Long-term forex trades can be an excellent investment opportunity.
Traders usually manage trades in long-term accounts every few weeks or once per month. This rebalancing process is important because of two things. Either the trader will close some currency pairs and add new positions, or the trader will stop loss and target based on the current market environment.
Every month traders and evaluate trading accounts and add or remove money from them.
Follow Trends on Regular Interval
This is the best way to learn to trade currencies by analyzing, tracking, and following daily or weekly trends. The forex market is highly volatile as many events across the globe impact various currencies, i.e., the U.S dollar can hike if the Federal Reserve cuts the rate, or a war in Iran can diminish its value as well. So, it’s susceptible to happenings around various countries.
You can have a close look over daily or weekly charts to notice patterns in the forex market. The fascinating thing here is that even a small trade or move can have a larger impact on profit or loss. You must stay consistent with your trades and notice the changes; just set a suitable stop as your target, and you are good to go!
The Art of ‘Carry Trading’
Trading is an art, and to excel in it, you have to practice. You can include carrying trading in your forex trading investment plans. When you buy a high-interest-rate currency against a low-interest-rate currency, it creates a case of carrying trading. To simplify it, let’s take an example.
Leila is a currency trader and likes to include carry trading in her investment plans. She buys the GBP at 1.1250, which means she would get 1125 U.S dollars for 1000 pounds. Now, USD is a high interest-paying currency that pays interest of 0.05 percent, and GBP is a low-interest rate currency having an interest rate of 0.01 percent. Leila doesn’t trade the currency, but she would receive the interest income at 0.04 (0.05-0.01) percent on her investment every day due to carrying trading. (Note: Interest rate changes every day, and so the interest income, it can also lead to paying a certain amount if your high-interest rate currency switches places with a low-interest one. This example is simplified for a better understanding.)
A great thing about this strategy is that you don’t have to do actual trading every day as a trader, as the interest rate does the work itself. You also get leveraged as per the size of your trade. Though, keep in mind that as the profit can be larger, the losses can be deeper.
Carry trading is prone to various challenges like frequent changes in interest rates, global events and their reactions, and your risk-taking capacity. If the events are positive, you may enjoy profits, but the downward times can also bankrupt you.
Learn Day Trading
If you want to learn to invest in forex as a beginner, you must be aware that the forex market is dynamic and vibrant.
It operates 24 hours from Monday to Friday. There are various times for various exchanges.
- London- 3 a.m. to 12 p.m. (noon)
- Tokyo- 7 p.m. to 4 a.m.
- New York- 8 a.m. to 5 p.m.
- Sydney- 5 p.m. to 2 a.m. (midnight)
So, you have to be specific about which exchange you want to trade. You can also conduct your technical analysis for currencies through candlestick charts and patterns and leverage them in your investment plans.
Go after Fundamentals
Fundamental investing is a well-known concept in the world of investment. It requires a trader to look deep into the value-adding and long-term factors rather than technical and short-term factors. If you are a trader who likes to avert risk, fundamental forex trading can work best for you.
While traders look after charts and patterns in technical day trading, they look for broader prospects like macro-economic situations in fundamental trading. It weighs more on the long-term gain as it involves a long-term approach to evaluating different countries’ economic conditions.
The Bottom Line
As a beginner wanting to invest in forex, you may find this field tough initially, but with practice and willingness, anyone can do it. If you are afraid of losing money, you can also opt for practice forex accounts available online to give you the same experience, but you won’t gain or lose any real money. As a beginner, you have to understand that things take time to work, and nothing will make you rich overnight. You have to spend your effort and dedication to succeed and earn money that lasts.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
