It is well-known that the forex market is volatile and vulnerable to sudden macroeconomic shifts. This was particularly evident last year, as the Brexit vote and the election of Donald Trump of U.S. President rocked the markets and sent investors scurrying for cover.
This is one of the many interesting and complex facts that underpins forex trading, and something that reflects the importance of knowledge as a key weapon for investors. With this in mind, let’s take a look at the other snippets of data and insight that can help novice traders to thrive:
1. Determinism Plays a Key Role in the Market
It is important that any trader with aspirations of being successful take time to understand the core nature of the markets that they choose to enter. This is particularly true in the case of the forex market, which is a unique and derivative-based entity that has the capacity to devour all of your funds and cost you far more than you initially invested.
One of the most interesting aspects of forex market trading is the importance of determinism, which dictates that there are several underlying laws that govern change within the sector. By understanding and respecting these rather than reacting emotively to every single event that threatens the market’s equilibrium, you can optimise the efficiency of your trades over time.
2. Demo Accounts Create a Practical Education for Traders
Even with a solid foundation of theoretical knowledge, you cannot thrive in the forex market without translating this into practical experience. Online trading platforms like ETX Capital can help with this, however, as they provide traders with access to demo accounts that enable that enable them to hone their skills in a real-time but simulated market environment. Over the course of three to six months, these accounts can be used to gain first-hand knowledge of the market without being forced to place your hard-earned income at risk.
3. The Derivative Nature of the Market Can Make or Break You
We have already touched on how the currency is a derivative, and this means that it can be traded without requiring investors to assume ownership of an underlying asset. It also delivers margin-based returns, making it possible for traders to earn far more than their original investment.
The opposite is also true, however, as forex traders can also lose far more than they have initially committed. Understanding this is crucial, as it ensures that traders take action to implement viable stop loss measures and also refrain from investing more than they can realistically afford to lose.