Strategies For Success: Forex Trading And Mining In Gatineau’s Financial Landscape

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Strategies For Success: Forex Trading And Mining In Gatineau’s Financial Landscape – Trading with virtual money instead of real money is a great way to test different styles. Image: Silas Stein/image alliance/Getty Images

Forex trading has gained popularity over the years due to its potential to trade and profit from the movement of currency pairs.

Strategies For Success: Forex Trading And Mining In Gatineau’s Financial Landscape

Strategies For Success: Forex Trading And Mining In Gatineau's Financial Landscape

The most popular currency pairs are euro / US dollar (EUR / USD), British pound / US dollar (GBP / USD), US dollar / yen (USD / JPY), Canadian dollar / US dollar (CAD / USD) and Swiss . franc/US dollar (CHF/USD).

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A disclaimer is in place at this point: forex trading is risky, especially when leverage is added to the mix. While there is the potential to make big profits, there is also a high chance of making losses.

Shaun Murison, senior analyst at IG Markets South Africa, advises newcomers to spend time learning about the driving dynamics of the forex market, and then try trading strategies on a demo account, trading virtual instead of real money. Only when one is comfortable with the trading strategy should real money be put at risk.

“There are various trading strategies that can be applied, but more important than this is risk management. When you enter a trade, you must remember the entry and exit points, managing the risk down through devices such as stop-loss, while assessing the risk that is considered relative to your reward (take profit level). If the trend follows, your profit level should be at least twice your stop-loss distance. In other words, you expect to profit at least twice as much as you want to lose in the trade. If you are scalping the market , you may expand your stop loss relative to taking profit, but you should have a higher percentage of winning trades,” said Murison.

Scaling in trading is the act of opening and then closing a position quickly, in the hope of profiting from small price movements. These traders are called ‘scalpers’ and will often trade several times a day – the theory being that small price movements are easier to capture than large ones.

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Because scalpers are looking for a lot of small profits, they will look for currency pairs such as EUR/USD where the cost (or spread) of trading is low.

IG Markets offers trading in dozens of currency pairs through a type of derivative known as contracts for difference (CFD).

CFDs allow you to benefit from price movements in the underlying asset pair or currency without owning the asset.

Strategies For Success: Forex Trading And Mining In Gatineau's Financial Landscape

For trading products such as EUR/USD, your fees can be as low as 0.6 pips or 60 US cents (with IG). A pip is the lowest increment that can change the price of a forex pair. For example, consider EUR/USD at 1.0169 on IG Markets. If the price moves to 1.0170, that will represent a one pip increase in price, equal to a $1 profit in one lot contract size.

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One scalping technique favored by many scalpers is known as the ‘working spread’. Essentially this means getting a cheap trade and exiting as soon as the position becomes profitable.

Traders using this system will often trade through high impact news events and look to catch short directional momentum moves triggered by these news events. Key economic events include interest rate decisions and guidance, GDP, inflation, and employment data. The IG economic calendar provides traders with a schedule of this news as well as what to expect from the news.

The general rule is: if the news is better than expected, this is positive for the underlying currency. The base currency is the first named currency in the pair. For example, the USD will be the base currency in the USD/ZAR (rand) pair.

Markets are often said to follow Newton’s laws of motion. In other words, the market will continue to move in every direction until acted upon by external forces.

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The path of monetary policy and rates, which are controlled by the central bank, tend to be the key forces that create inertia or trends in the forex market. For example, the interest rate policy of the US Federal Reserve has been more aggressive in raising rates than the case of the European Central Bank (ECB). This is reflected in the euro weakening against the USD.

Technical traders can see this trend reflected on the chart, as EUR/USD has been lower during this period.

Trend followers are concerned with the overall direction of the market and look for opportunities to join the trend and ride it until it shows signs of a reversal. A trend reversal will occur when the underlying catalyst, usually in the form of central bank activity, changes.

Strategies For Success: Forex Trading And Mining In Gatineau's Financial Landscape

“It’s easier to trade ongoing trends than to try and predict when the market will change,” Murison said.

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“Trends tend to stay moving longer than traders expect, so this trend is a valid trading strategy, because there is more money on offer than a brief counter movement.”

Technical indicators that can help traders determine the trend of currency pairs include moving averages, MACD, ADX, and Parabolic SAR to name but a few (available on the IG platform).

Volatility in the forex market can also affect your emotions, and this is the most critical factor in determining success or failure in the forex market, says Murison.

“Emotions such as fear, greed, temptation, doubt, and anxiety may persuade you to trade or cloud your judgment. Either way, if your feelings interfere with your decision, it can damage your trading results. Therefore, you must have a strategy trading with risk management. When you enter a trade, you immediately place a stop-loss to get out of a losing trade before it gets worse. This is one way to help traders control their emotions.

Steps To Building A Winning Trading Plan

IG Markets South Africa was established in 2010 and is regulated by the Financial Sector Conduct Authority (in South Africa) as an over-the-counter derivatives provider and authorized financial services provider (FSP No 41393). It has an office in Sandton to service thousands of South African clients. The board and senior management in South Africa is made up of mostly South Africans who make up the true South African operations. As one of the largest employers in the online brokerage category, we are proud to play a leading role in South Africa’s growing financial services industry.

IG Markets is part of the LSE-listed IG Group, which has a market capitalization of £3.4 billion (R71.4 billion). It has more than 330 000 active clients worldwide.

Ciaran Ryan is a Johannesburg-based freelance writer with a background in finance and mining, having previously led a gold mining operation in Ghana. He currently writes for a number of SA and overseas journals on issues ranging from mining to investment.

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Strategies For Success: Forex Trading And Mining In Gatineau's Financial Landscape

Simply put, cryptocurrencies (also known as digital currencies, cryptos, virtual assets, or digital assets) are a form of digital currency. It can be used to pay for goods and services just like conventional currency. Just like the way traditional currencies can be traded on forex, cryptocurrencies can also be traded against specific pairs on special platforms called cryptocurrency exchanges.

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