Today I’ll be answering why do forex trades start negative.
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why do forex trades start negative?
A big reason why forex trades start negative for most traders is because of the spread. Also, depending on the pip value that can play a role. If the trader fails to adapt to the market, they could be getting in at the wrong time. And lastly, the combination of a low capital and bad emotions that’s commonly associated with money can be a factor.
There’s numerous reasons as to why your spread could be high in forex.
The first thing could be too high of volatility.
That, or the liquidity (how easily you can get rid of the currency) is low.
Volatility is how fast stock (or in this case, currency) rises or drops in the market.
The big difference of the spread is the ask and the price price.
For example, if you’re selling the USD for the CAD, the price to enter could make the number jump violently.
It’s important to add that spread is big in this question, but there are bigger things to focus on (you’ll find out later).
One book that explains spreads in depth really well is the Forex Ultimate Guide.
Plenty of high reviews make it obvious that it’s a smart buy for anybody trying to learn more about this topic.
There’s quite a few different pairs.
The first is the pound to the dollar.
On investopedia, they created a list of four different pairs with the highest pip value on average.
And the dollar made 3 out of the 4 pairs, but 2 worth mentioning is GBP/USD and the second’s USD/JPY.
Next is another that involves the USD, and it’s EUR/USD.
The claim is that it has the best “ratio pair” out the common ones.
While we’re on the process of identifying the various pairs, it’s worth knowing that mataf has a unique chart.
This chart provides the value for virtually every pair you can find on a platform.
Failing to adapt to the market
Adapting to the market is majorly important when trading forex.
The best response is having a good analysis.
A good analysis comes with being able to study the markets and predict where it should go eventually.
On top of that, effective methods of using the tactic will make a difference.
You should keep this in mind because prices will constantly change in the market.
As mentioned before, the volatility of the pairs will play a role in the gameplan you use when trading.
Plus, as you create your own “map” the markets themselves even adapt to what the majority trades.
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