Forex Trading or foreign exchange trading is a field that is attracting a large number of international financial investors. This is a big playground and also a field full of challenges and opportunities. When first joining, understanding forex what is Trading as well as related knowledge will help traders minimize risks and support the smartest decisions. In this article, Learn Forex Trading will help you dive deeper into forex trading terms and methods.
what is Trading? Fx what is Trading?
Trading is an English word that translates to transaction or exchange. This is a term commonly used in the stock market, securities, cryptocurrency,… Trading describes the main job of a trader, also known as a trader. Trading is also considered a profession and to be successful with it, you need to have a suitable plan and trading method.
Trading can be briefly understood as traders looking for investment opportunities to make profits from exchanging and buying and selling goods on the financial market.
See more: Successful what is forex exchange trading?
What are Trading styles?
Each trader will have their own forex trading method, corresponding to different trading styles. Depending on each person’s conditions, risk tolerance, and analytical mind. Below are the 4 most popular trading styles you need to know.
Position Trading smart trading strategy
Position What is Trading? This is a long-term trading style, lasting several months or years. When trading in this style, traders often combine technical and fundamental analysis skills in the most proficient way. From there, create the most effective trading strategy in the long term. Besides, observing weekly and monthly charts also provides good support in evaluating the market and making decisions.
- Advantages: Saves trading time, and reduces stress when not having to observe dizzying short-term price fluctuations.
- Disadvantage: High risk due to wider stop loss point.
Day Trading Forex trading style
Day Trading is a style of day trading. That means the trader will execute orders to buy and sell that asset on the same day. Investors do not maintain any positions until the next day but will close the transaction at the end of each session. Regardless of profit, it doesn’t matter much. Technical analysis and observing price lists on minute charts are things traders often do.
This trading style requires traders to have a lot of time and careful preparation in all aspects, and continuously monitor the market.
Surfing style Swing What is Trading?
Swing Trading is also a short-term trading style but longer than day trading. Normally, trading orders will be held for several days or weeks. The purpose is to take advantage of opportunities to profit from price movements, trying to observe market movements. Traders will analyze techniques combined with price action to determine entry and exit points of the market and then make a profit.
Scalp Trading style
Scalp what is Trading? This is a form of scalping trading to earn small, regular profits, by placing and closing small orders many times a day. This method is quite simple and loved by many traders. The main feature is that orders are never held until the next session or overnight. The biggest limitation of this style is that traders need to concentrate highly to increase their winning rate.
The most popular forex trading methods
The success in forex trading partly depends on the trading method that the investor chooses. The wrong method leads to the risk of loss.
Price Action Method – Trade forex according to price action
Price Action is price action, very popular in the financial investment or forex world. Here, the trader will focus on the price. Traders will observe how the price of a certain currency pair moves to decide to buy/sell.
This trading method is not complicated and is suitable for most traders, especially new traders. You need to remember that the effectiveness of Price Action will be best promoted when the forex market is highly volatile, plus there is high liquidity.
Forex trading strategy customized according to news
Trading forex according to the news is also quite simple but is chosen by many investors. This trading method brings relatively high efficiency. Just catch up on news, events, or economic reports from countries around the world. From there, traders can accurately determine the exchange rates of currency pairs and calculate the appropriate price to enter the order. Brings profit opportunities in a short time.
Flexible forex trading method on multiple time frames
The multi-trade, multi-timeframe method is used by many traders to analyze prices and charts. Investors can monitor 1 or more time frames. It is best to have a maximum of 3 frames on the same screen to avoid confusion. The 3 most popular time frames include:
- Short term: M15, H1 and H4.
- Medium-term: H4, weekly chart, and monthly chart.
- Long-term: Daily chart, weekly chart, monthly, and quarterly charts.
What are the most basic types of orders in forex?
Below are the most basic types of orders in forex trading that you need to practice to become proficient in.
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Market Order – Market order
This is an order to buy or sell a currency pair at the current price. Normally, traders will evaluate this as the best price and want to execute the order immediately. Market Order will be executed at the time the order is placed. This type of order is considered the simplest and is the first order that a new trader approaches.
Pending Order – Pending order
A pending order is a type of order placed at a desired price, not the current price. This order helps traders place orders in advance, without needing to watch the chart and without losing the opportunity. The secret to success with pending orders is to place orders according to the spread strategy and in the sideway area. Sideways meaning? Sideway means the market is moving up and down in a sideways direction, repeating the cycle.
In MT4, there are 4 types of pending orders supported:
Buy Limit
what is buy limit? This type of order is set by traders with the expectation of buying at a price lower than the current price. Investors use the Buy limit order with the expectation that the price will bottom and reverse. They will buy at or near this reversal point. When the price falls to the order price point, the order will be activated.
Sell Limit
A Sell Limit order will be set when the trader expects the price to increase more than the current price before the price turns down. When the price hits the order point, the sell order will be executed and the trader will achieve much higher profits than the Market Order.
Buy Stop
Buy Stop is a type of pending order set by traders to buy a currency pair at a price higher than the current market price. You place this order because you want to make sure the market is going in the right direction before buying. When the price reaches the price point you set to buy, the Buy Stop order will be matched.
Sell Stop
A sell Stop is an order set to sell at a price lower than the current price. This order is used by traders when it is uncertain whether the price will increase or decrease. Therefore, they will observe to see if the price reverses at the support level. At this time, if the price continues to decrease, they will grasp the trend and enter a sell-stop order. Conversely, if the price reverses, the order is not executed and the trader loses nothing.
Conclude
Hopefully, the above article of Learn Forex Trading will help you understand Forex what is Trading? At the same time, capture the most important information related to trading and fx trading. However, to be successful, traders need to research more carefully and accumulate more experience to succeed.
FAQ
Why is international economic news important in FX trading?
International economic news can significantly affect the value of currencies. Events such as interest rate announcements, national economic conditions, or political events can create large fluctuations in the foreign exchange market. Traders often monitor these events to predict trends, thereby making the best decisions.
How much capital do I need to participate in forex trading?
The amount of capital required to engage in forex trading depends on many factors such as leverage used, trade size, and risk management strategy. Leverage enhances the power of capital, but also increases risk. Many forex brokers allow opening accounts with relatively low capital.
Basic command groups in FX what is trading?
There are two main types of orders in forex trading: market orders and pending orders. A market order requires immediate buying or selling at the current market price. In contrast, a limit order sets a specific price at which the trade will be executed, and it waits until the price reaches that price.
