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Trading FX on the Web

Nowadays it is more and more common to trade the FOREX market on the Web, even with a low budget. In particular currency binary options enable traders to deal with the FX market in an easy way.

But you need trading rules, especially if you are just getting started. A great deal of time, market knowledge and learning, trading strategy development and a large amount of self restraint make for successful trading. It is not as simple as it seems.

Anyone who says you will always make money in foreign exchange markets is being deceptive and untruthful. Foreign exchange, by nature, is an extremely volatile market. The practice of online currency trading by way of margin increases that volatility proportionally. The FX market is a very rapid market which is naturally unpredictable.

It is generally agreed that in order to make a successful trade, a trader needs to take into account technical and fundamental data and then make an informed decision based on their understanding of market sentiment and expectation. Timing a trade correctly is infinitely the most important variable in trading binary options successfully but often there will be times where a traders’ timing will be off. Don’t expect to make a profit on every trade.

One important rule is to trade with money you can afford to lose. The FX market is certainly exciting, exhilarating and it can become addictive. So use caution and know what your budget is before getting started. The more you are at risk the harder it is to make careful and alert decisions. Money you earn is precious, but money you need to live should never be traded.

Try to identify the state of the market. What is the market responding to at the moment? Are trends showing an upward or downward motion or is the market range trading? Is the market strong or weak? Is this an old trend or does it look like a new trend that’s starting to emerge. Perceiving a clear picture of the market situation is laying the basis for a successful trade.

Determine what time frame you’re trading on. Often traders enter the market without thinking about the timing of their trades. You need to estimate in your own mind’s eye the movement that you would expect to happen. Within this conjecture, resides a price development during a specific period of time. Attached to this is the plan with which you wish to exit that trade.

The importance of this is to put your trade in perspective, in your own mind, and although it is virtually impossible to know exactly when you will exit the market, it is important to define from the outset if you’ll be ‘scalping’ (trying to attain a few points off the market) trading per day, or continuing on for a longer period. This will also determine what chart period you’re looking at.

If you trade many times a day, there’s no point basing your analysis on a daily graph, you’ll probably want to analyse 30 minute or hourly graphs. It is also important to know the different time periods when various financial centres enter and exit the market as this creates more or less volatility and liquidity and can influence market movements.

The above is one of the reasons why currency digital options are so popular, as the exit timing is already integrated into the product so you do not need to worry about that. Note that you may be correct about a potential market movement but be too early or too late when you enter the trade. Technical analysis can help you identify when and at what price a move may occur. If in doubt, stay out. If you’re unsure about a trade and find you’re hesitating, do not make the trade as the market will still be there tomorrow.

Market sentiment is what the majority of the market appears to be feeling about the market and therefore what it is doing to do or will do. This is basically about trend. You may have heard the term the trend is your friend. This basically means that if you’re in the right direction with a strong trend you will make successful trades. This of course is a very simple way of saying a trend is capable of reversing itself at any time. Technical and fundamental data can indicate if the trend has begun some time before and if it is strong or weak.

Market expectation is relative to what most people are expecting as far as forthcoming news is concerned. If one is expecting an interest rate to rise and it does, then there usually will not be much of a movement because that information will already have been taken into account by the market, alternatively if the reverse happens, markets will usually react violently.

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