The decentralized currency trading market with a global base for buying, selling and undergoing other forms of monetary exchange through volume trading is termed as Foreign Exchange or Forex Market.
The Financial Institutions, Global Banks form the pivot of trading in Forex through a common platform by roping in buyers and sellers from across the world. A proper understanding of the mode of operation along with a comprehensive and thorough analysis of the automated trading platform can be used to leverage maximum profits, even at your leisure.
The huge trading volumes and class of quality asset coupled with its geographical spread, make it a lucrative platform to get in with a fat chance of earning big bucks. A mathematical approach to the portfolio management and investment analysis derails you from taking pot luck to a more systematic realization of profits. Here are the seven steps to economic salvation:
1. The Time Series Model and its Ramifications
The Moving Average method to get a price check is one the most effective weapon at one’s disposal. You should continue investing when the investment trend is glued to the Moving Averages as it enhances the probability of elimination of bias.
The Moving averages should be based on time frames so that one can be privy to the bearish times. The seasonal and cyclical variations are part of the larger game where an Autoregressive Moving Average method would come in handy for trend evaluation.
2. Perseverance in Trade Planning at the Forex Market
The market sentiments usually get into a panic-stricken mode due to the inadequacy of risk management acumen. To realize a short-term profit, one gives in to the evil of losing acquired assets and vice versa.
But a more realistic approach may be to resort to a predetermined stop for withdrawal of profits, which may be fixed on a comprehensive forecasting model of the market.
Based on a multiplicative seasonality, the increasing seasonal variations may be identified and smoothed out. This is quite functional to set up the perfect predetermined stop.
3. A Probabilistic Interpretation of the Outcomes
In lieu of over-emphasizing on Elliot Wave patterns, a probabilistic outlook to the different patterns displayed by the curve is more imperative. High probability patterns are to be segregated from the low probability patterns for a comprehensive study of market behavior.
4. The Search for the Perfect Pair
Despite the fact that forex trading occurs with every tick of your clock, investing at the peak hours may turn out to be a safer bet. Liquidity in the markets is in their high, depending on the currency pairs you choose to trade upon. For assured returns on investments, it is advisable to bank upon the established hard currencies.
However, care should be taken that too much of positive market sentiment for a particular currency may scale up the cost of investments. In such cases, it is better to avoid them and go for a lower one instead, as the yield would be higher in the second scenario.
In other words, if there is too much demand for US dollars, prices of the dollar to your currency will soar up. From there, it can only depreciate with a much higher probability than any appreciation trend.
5. Let Go of the Manual Trading System
If you are a beginner at Forex trading, bank upon technologies to better serve your cause. Software that recognizes profitable spreads in a dynamic market could monitor currency values real time. It may also suggest the profitable currency at the time of making an investment.
A clear and concise analysis of the market trends along with a ‘set and forget’ module can help the investor the right decision. More programmable variants to suit other exigencies of the market may be resorted to.
6. A Disciplined Approach to Mitigate Sudden Market Upheavals
Before there is a reversal in trend due to some external emergencies, traders can sniff out their money when there is a favorable balance of trade accounts.
The twin policies of ‘Trailing Stop’ and ‘Stop order for market’ may minimize market risks. The mini Forex trading account requires lesser than the standard deposit of cash i.e. an exact 1000 currency units. With the mini accounts, traders can buy currency lots on margin.
7. Keep Yourself Up To Date
A comprehensive glance at the currency calendar would provide the trader with the major new releases. Apart from that, keep the regulatory provisions and the list suitable Forex broker at your finger-tips to garner maximum profits.