You’ve probably heard a lot about how the virus pandemic has been impacting currency values all around the world. This is causing many people who’ve never even heard of FOREX trading to start looking into the market. Those who have been trading foreign currencies are getting excited about the risk-benefit potential we’re finding in such a volatile market.
If you’re looking to capitalize on the market fluctuations, there are some do’s and don’ts to your trading.
Don’t: Make Large Trades Because Of The News
When a massive headline hits the media, it’s going to cause some market volatility in the FOREX market. Generally, these can correct themselves in the future, so if you’ve just made a purchase don’t back out and take a loss. You will be your most rational immediately before trading, and the most emotional immediately after you’ve purchased a currency pair. The trick is to eliminate the emotional response and completely think about things objectively. This is why it’s so important to have a set of rules that you’ve self-imposed on any particular currency pair. Let the other people panic when there’s a headline, if you’re investing for the long term, there’s no reason you can’t sit on your investment and wait for it to correct itself.
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Do: Inform Yourself As Best As Possible
Generally, you don’t want the news to impact your current trades, and if you should sell at this time. But you don’t want to stay informed about any potential news that could make a currency pair drop in value. When you’re staying informed you might get a clearer picture of the long-term potential. Again, this strategy is more for those looking to take a long game approach to bearish markets. Even if you’re focusing more on a short-term strategy, you still want to be keeping up with the news. Don’t just settle for the news that might be on your favorite feed. Explore direct sources of news from the country of origin for your currency pair or you might visit this website to have a broader look at worldwide news. The market doesn’t always behave the way that we expect it to, but that doesn’t mean we can’t make best guesses.
Don’t: Start Making Risky Trades
Generally, the rules of trading are as follows, buy when others want to sell, and sell when others want to buy. Following these rules can help you stay ahead of the game when the buyer and seller panic start causing market volatility. It’s fine to capitalize on a reduced Euro, but you don’t want to start making especially risky trades either. If you’re new to the FOREX game and you think it’s a simple way to make a fast buck, think again. Just like the stock market, foreign currencies have dips and troughs that can take years to correct themselves. Aside from the U.S. Dollar, we’re seeing a very bearish market, but yield potential in the future could be high. Still, you don’t want to be emptying your IRA to invest in the FOREX market at any time. Invest an affordable amount, but keep your portfolio diverse. With investments placed in multiple categories, you’re less likely to see all of your assets plunge at once.
Do: Set Goals And Limits For Yourself
You want to set buying and selling limits and goals for yourself. You want to be ahead of the market when it comes time to sell, and you want to capitalize on a good time to buy. The limits that each person sets on a particular currency is going to vary from one individual to another. The best thing that you can do is educate yourself on a currency pair, and set realistic goals for where you think they will be in the future. The market is going to be experiencing some volatility with the virus pandemic so these margins might be larger than normal. Find a price that you’d be comfortable selling at if a currency reaches a peak and experiences bull movement, or if the currency drops below a certain standard if you want to hold onto it or sell it.
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It’s easy to get overly excited or worried about your trades when a particular currency pair becomes bearish. Before making the trade, you need to ask yourself if you’re aiming for long-term or short-term goals, and what your expectations are going to be. Set alerts for yourself when currency pairs hit certain thresholds so you can decide what you’re going to do at that point. By keeping calm and staying rational, you’ll avoid making emotional decisions that will hurt your trading in the end.