5 frequently asked questions about Forex trading

If you’re only just starting your venture into Forex trading, it can be daunting to jump into the market. There are a lot of places to look, and with the variety of currencies available to trade, you might not know where to go.

Fortunately, there are plenty of ways to help newcomers develop the knowledge, patience and financial strategies needed to make inroads in forex trading. It can be tough, and you more than likely will not succeed – over 90% of traders walk away empty-handed – but using helpful guides like this will allow you to make a more confident move in the market.

1. What are the benefits of trading Forex?

Access to a large and liquid market allows for a wider range of currencies to trade in, and as a result allows traders to move away from the potentially risky U.S. dollar. With the market open 24 hours a day, five days a week, this is more than most traditional equity, bond or futures markets.

Most of this foreign trading doesn’t work on commission and instead works on a bid/ask spread that is usually tighter than most equities.

2. What are some of the biggest dangers to look out for in the market?

Leverage, which allows traders to work with more money than what they have in their account, can be a useful tool if used correctly, but can also backfire spectacularly. Essentially, if you are trading at 2:1, you could have a $1,000 deposit in your account and still be working with $2,000.

If you fall for the offers that some brokers provide, like a leverage of 50:1, you could feasibly make decent money. The reality, however, is you could just as easily lose it all in an instant.

The volatile nature of the markets must also be considered. As a result of economic changes, bank interventions and other factors, the markets can fluctuate wildly with little to no warning.

We recommend you take the time to study the dangers of the market, or if you’re a bit unsure, you can always try Learn to Trade, who can help you make sense of the market.

3. What are the most popular traded currencies?

According to IG, the 5 most valuable traded currencies are:

EUR – USD (Euro to US Dollar)
USD – JPY (US Dollar to Japanese Yen)
GBP – USD (British pound sterling to US dollar)
AUD – USD (Australian dollar to US dollar)
USD – CAD (US dollar to Canadian dollar)

4. Is it possible to recover from losses? 

It is possible, but it is recommended that you take your time following the initial loss to reflect and ensure you don’t make any more emotionally-led decisions. Plenty of traders have come back from a decent hit, but the volatile nature of the markets can create headaches for getting your investment back as soon as possible.

It’s also important to keep an eye on other factors in this time, including the interest rate, as any movement in this percentage can affect the exchange rates of some foreign currencies.

5. What can I do to enhance my trading results?

While some people have tried for years and were unable to make a significant impact on the market, some have rebounded after bringing their trading style into consideration.

Those who had made errors had corrected them and were also aware of the dangers of trading with multiple currency pairs, instead only using one.

Forex trading can be a very dangerous market to get into if you come unprepared, but if you’re willing to put in the time and research, you can make it a very profitable outcome. Talk with people who have knowledge in the field and be patient with your trading – it may not happen overnight, but if you play your cards right you could succeed.