What is Currency Trading? The Basics Of Currency Trading South Africa

Trade with currencies is one of the many ways to trade nowadays. It has its own strategies and specifics, that makes it quite different than stock trading for example. In this article, you are going to find out what exactly the currency trading is and how can you be successful in it.

What exactly is currency trading? 

The name currency trading (forex) is really self-explanatory. In this kind of trade, we exchange currencies and we make a profit as the value of one currency increases compared to others. Most of the time this is really hard to predict and around 80% of the newbies lose money, which makes the currency trading not that friendly towards the newcomers. The markets change all the time and there are a few hours in which the currency trading is most active because two markets, situated in different regions work at the same time for some time, most commonly 1 hour or so. This is the time when you can either win or lose the most.

What are some useful tips I can use in order to be more successful? 

Since the market does not remain the same for a long amount of time, which can be quite stressful and hard to follow, there are some tips which can help you be more confident in case you follow them closely.

1. Do not start with a lot of currencies and focus just on one pair. Over time you should notice some patterns and ways to exploit them. Keeping an eye on more than one pair at a time can be quite exhausting for a newcomer.
2. Understand how and why markets change. Understanding that will make it easier for you to “read” the markets for currency trading and you will be able to make better choices. It is a good idea to spend some time looking at the news and how they influence the currency trading markets. The more information you get, the better!
3. Do not trade when influenced by emotions. The less emotional you are about both gains and losses, the better. Do not get really confident because of your success because it can turn against you. You have to understand that not every trade you do will be profitable and this is okay.
4. Choose a platform with a good reputation. It should have a good amount of traders in the same currency pair you trade too. A user-friendly platform will let you learn quickly and avoid losing money because of its simplicity. If that platform for currency trade has forums, it is a good idea to check them out as well, there can be a lot of useful information and tips!
5. Choose a strategy and stick to it! Plenty of people tend to forget about their strategies and get a bit more greedy, which sometimes can lead to unexpected results. Keep track of every trade you do, it can really help you in the long run!

What are the pros and cons of currency trading? 

Currency trading is unique and compared to other kinds of trading, for example, the stock trade. While trading stocks and shares involves not that high risk for something to go wrong, it does not have the liquidity of currency trading, allowing you to either gain or lose money faster. As mentioned before, trading currencies is harder for newcomers, it is still possible to gain profit out of it if you do your research, even though 80% of beginners lose money on their first trades.

The taxes are usually lower when trading currencies compared to the stock markets, which is another advantage.

Currency trading offers a wide variety of tools to help you make a profit without consuming all your attention. There are plenty of sites, offering demo accounts, which can help you get experience without investing any money whatsoever! Some of those useful tools keep track of the value of the currencies and this could potentially save you a fair amount of money, which is great!

PROS:

1. High This can be a double-edged sword, but for experienced traders, this is a great way to make some money for a short period of time.
2. Multiple ways to gain experience without investing a big amount of money. Except for information on the Internet, there are some good books, written by people who are experts in trading stocks over the course of many years! Do not forget about all the useful tools and demo accounts!
3. Leverage can jump-start your career if you already have the experience with demo accounts we have talked about earlier. It essentially gives you money that you do not own and you can use them to scale up your profits AND losses! Just like the volatile market, this has the potential to either win you a lot of money or leave you in debt!

CONS:

Since most of the pros can be tricky, it all comes down to experience and knowledge about how the currency trade market works and even then you are not 100% safe! As we already mentioned only 2 out of 10 beginners manage to make a profit out of trading currencies, you should really think twice about that.