More specifically, the spot market is where currencies are bought and sold according to the current price. That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment towards ongoing political situations (both locally and internationally), as well as the perception of the future performance of one currency against another. When a deal is finalized, this is known as a "spot deal." It is a bilateral transaction by which one party delivers an agreed-upon currency amount to the counter party and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present (rather than the future), these trades actually take two days for settlement.
The blender company could have reduced this risk by shorting the euro and buying the USD when they were at parity. That way, if the dollar rose in value, the profits from the trade would offset the reduced profit from the sale of blenders. If the USD fell in value, the more favorable exchange rate will increase the profit from the sale of blenders, which offsets the losses in the trade.
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You need to always manage your risk properly. If you do not control your risk on EVERY single trade, you open the door for emotional trading to take hold of your mind, and I can promise you that once you start down the slippery slope of emotional Forex trading, it CAN be very hard to stop your slide, or even recognize that you are trading emotionally in the first place. You can largely eliminate the possibility of becoming an overly-emotional trader by only risking an amount of money per trade that you are 100% OK with losing. You should EXPECT TO LOSE on any given trade, that way you are always aware of the very real possibility of it actually happening.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
The first method is speculating on the direction a currency pair is going to trade, and buying or selling this pair. Traders can do this scalping, day trading or swing trading. A traders goal is always to predict the market direction correctly. There will always be losing trades as I explain in forex help tip 6, but if we enter the right trades we give ourselves the best chance of succeeding in forex.
Forex trading psychology is a big thing. Often, it is the psychology, and not a lack of academic knowledge or skill in application, that is considered to be the primary originator of trading mistakes. Mistakes are constantly repeated by financial traders of various national, cultural, and social backgrounds, which suggests that it is the common traits shared among us as humans that lie in the base of those mistakes.
Probably the most important tip I can give you is to accept the fact that some trades are just going to lose. There is nothing you can do about that. Every trader has losing trades. It is part of the forex game, forex is a game, there are buyers and sellers, and our job is to pick the right side. We can't always do it, but if we enter trades with at least 3 strong technical & fundamental reasons, then we give ourselves the best chance to succeed in the long run.
You need to become an organized trader. If there is something that is the “glue” that holds all of the points I’ve discussed in this part together, it is being an organized trader. By organized, I mean having a trading plan and a trading journal and actually using both of them consistently. You need to think of Forex trading like a business instead of like a trip to the casino. Be calm and calculating in all your interactions with the market and you should have no problem keeping the emotional trading demons at bay.
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