The first step to becoming a successful Forex trader on AvaTrade or any other platform is to understand the basics of Forex trading. Many are usually attracted to Forex trading by the testimonies of people who have tried their hands on it. Still, when they do Forex trading on their own, they always find it hard to understand the basic concept surrounding it and how to earn money.
Every industry has foundational concepts that serve as the base upon which other ideas rest. Industry players’ first task is to understand these foundational concepts to connect other ideas to them. Forex trading is an industry that is built on very interesting basic concepts. Understanding the foundational Forex trading concepts and terms goes a long way in shaping an interested Forex trader’s journey. Newbie traders, especially those starting independently, may have difficulty understanding these concepts and terms. If they are not careful, they may lose their investments.
Forex trading is a vast industry with global relevance. It is a market with complex structures, but you can only understand them if you speak the global Forex trading language well. To begin your Forex trading journey, you must understand the terminology above other things. Coming across some Forex trading terms may make a beginner trader feel inadequate. Still, we do not want that to deter you. That is why we will explain some important Forex trading concepts in this article.
An overview of the global Forex trading market
The global Forex market is not random. It is premised upon the laws of demand and supply, one of the fundamental laws of economics. A rise in the demand for a certain currency will shoot up its price, and reduced demand for any currency will drop its price. The law of demand and supply is not random. It is always true and is the biggest pointer to the fact that Forex markets can never be random.
Many people wrongly assume that Forex markets are not defined around certain parameters. They believe that a randomized system chooses trading pairs and currencies. Unfortunately, this widely spread notion affects most Forex traders when they set out on their Forex trading journeys.
Forex markets are not random. They exhibit patterns that make it possible for traders to accurately forecast how they will behave when subjected to certain factors in the future.
Illustration to understand how the forex market operates
Consider a Forex market as a piece of music played by an orchestra. Each instrumentalist contributes to the sweet melody from the sound generated from the music piece. Some of these instrumentalists play low notes, while others play high notes. The culmination of all these notes determines the rhythm of the music.
Markets have rhythm; they have some dynamics that reverberate around them and determine their pulse, just like beats in music. These dynamics, like the beats in a piece of music, define market harmonics, and being able to identify the market’s rhythm, or its pulse if you will, places you in a pole position to exploit and maximize all opportunities available in the market, i.e., it allows you milk the market to your advantage.
Because of the presence of market harmonic, you will find visual occurrences that have tendencies to repeat themselves. Forex traders identify these tendencies, study them, and center their trade around them.
Forex markets aggregate the contributions of many players. Millions of forex traders enter the market with their unique thoughts and strategies to make them win trades. The trade calls from each of these traders determine how the market flows. Still, you should note that their calls depend on certain factors that form the market’s structure.
To make a profit from Forex trading, you need to be able to understand the global Forex market’s structure. Understanding the market’s structure is advantageous to Forex traders. They can use their information to predict trends that may shape market chart directions. Like every other market, forex trading has its pros and cons. It’s advisable to start small. Some trading platforms offer a demo account.