What’s Forex? Perhaps you think that’s a boring question and know it’s short for foreign currency exchange already. But, what is Forex as a concept? You’ve probably traded currencies on Olymp Trade for a while now, but only with so-so results so far. If that’s the case for you, it’s probably time for a change. Given that a building only stands to last upon a strong foundation, let’s unload everything we’ve learned about Forex concepts and start rebuilding some of our trading knowledge from the ground up.
The widely-known concept of Forex is buying or selling currencies on an exchange, where traders aim to make a profit from future price differences. However, Olymp Trade Forex mode has more on the table than the traditional global Forex market. Re-learning Forex trading concepts from square one helps traders identify where they have gone wrong, so they can fix it immediately for better trading gains. In the wise words of Confucius: “It does not matter how slowly you go as long as you do not stop.”
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Explanations and definitions of terms.
Currency pairs are not the only assets available on Olymp Trade’s Forex mode. Suppose a trader feels doubtful about some currency pairs showing high volatility after a news release, he can opt to trade on other non-currency asset pairs, such as Gold or stocks. The Forex concept behind Olymp Trade means that you can engage in exceptional and profitable trading no matter which way the wind is blowing. Of course, your decisions should not totally depend on whether an asset’s volatility is high or low, which leads us to the next point.
So, how do we decide whether it’s time to open a buy or sell trade on a Forex position? All trading decisions should rely on technical or fundamental analysis, but better both of them. This is an incredibly important Forex trading concept, although some traders say neither technical nor fundamental analysis bring 100% accurate results.
Let’s take a look at the weather app on your phone. You might see that the app tells you it will rain tomorrow and the day after — but it doesn’t happen. Likewise, it lets you know tomorrow will be a sunny day, but there’s a thunderstorm instead. Forecasting in Forex trading concepts is relatively similar. Traders may see on the chart that an asset’s price will increase, but they can’t tell precisely when that will take place, which is why you need to know the following points.
Forex order types
Let’s say you want to trade the Europe Composite Index in Forex mode, so you set the Simple Moving Average (SMA) indicator on the chart. SMA 20 shows that the index price might be going down today, but you can’t be sure when it will happen, since some thin green candles are still trying to move up further.
Luckily, you don’t need to keep your eyes on the screen so as not to miss a crucial price movement, because that’s not how modern Forex trading concepts work. Just like the traditional Forex platform that Olymp Trade is inspired from, there are some Forex order types to help you manage your trades:
Previously known as a pending order, you can use this feature to open a buy position at a future price or time. You can trade with ease while enjoying your life amid a changing world.
Stop Loss and Take Profit
You’ve surely heard about these two a lot, and we will keep reminding you to use these types of orders whenever you trade.
Using Stop Loss and Take Profit in Forex will simplify your daily routine while keeping you safe from further losses and fixing your profit.
Trailing Stop Loss
This tool is available when you reach Level 8 on Trader’s Way. Trailing Stop Loss secures your profits immediately before the price bounces back — a convenient tool in a higher volatility market.
Through developing a trading strategy, you’ll be able to pinpoint the exact moment to enter and exit the market with profit. You may not always be successful, but mastering this will surely help you avoid emotional trading. You might have heard about some popular Forex strategies, but a trader really only needs one or two strategies before moving on to master others.
The simplest one is trend trading, a popular Forex strategy that entails watching the current trend closely and opening a position accordingly. For example, the one-hour chart and SMA 20 below shows an upward direction in EURO STOXX 50. So, we just need to open a buy trade because the intersection (indicated by the purple rectangle) shows that this asset is bullish. It’s that simple.
Another popular Forex strategy that’s worth paying attention to is the price action strategy. As its name suggests, we should be observing an asset’s past price behavior over a given time to predict its movement in the future, but without indicators this time. That’s right! This strategy relies on your ability to spot a specific pattern in the chart and decide when you need to enter and exit the market. It is widely used among experienced traders, while beginners may need time to familiarize themselves with it.
No trade should take place without risk management, no matter how big your profits have been. The reason is simple: Traders must know how to protect themselves so they won’t be swept away from the market in one moment. Actually, though, the market is not that scary. All us traders benefit from it so much, don’t we? We just need to be smart about trading on it. Risk management is a Forex concept that reminds us to be aware even in good times without discouraging us from seizing the opportunity.
As traders, our task is just that — trading — but what kind of trading do we need? Understanding Forex trading concepts is essential to shaping your mindset about the future you want to reach with your trading journey, acknowledging your mistakes and forever improving. Trading on Forex is like a lifetime of learning: The result may differ as you change. If you’re still on the fence, check out the benefits of Forex trading, develop your trading strategy or get yourself acquainted with the world of Forex.Trade Forex Now
Risk warning: The contents of this article do not constitute investment advice, and you bear sole responsibility for your trading activity and/or trading results.