Are you a trader? FX expert Mankash Jain explains the five things you need to know about forex to optimise your trading performance.
In the dynamic world of international financial markets, traders need to stay informed and updated with the necessary knowledge to navigate the complexities of the foreign exchange market. In this article, Mankash Jain shares his insights from over 20 years of experience on the five crucial aspects that every trader should know when engaging in forex trading.
1. The fundamentals of forex trading
Forex trading involves the buying and selling of international currencies to potentially make profits out of favourable exchange rates. As a trader, it is essential to have a solid understanding of the fundamental and technical factors that influence currency movements, such as economic indicators, geopolitical events, and central bank policies. At the same time, you should be familiar with the vast array of trading assets and instruments (as well as their symbols) aside from forex; from currencies and commodities to stocks and shares, indices, and now – crypto.
2. Risk management and capital preservation
The importance of employing effective risk management strategies, such as setting stop-loss orders and implementing appropriate position sizing, is often overlooked but is essential if you want to protect your capital. By managing risk, traders can safeguard their capital and mitigate potential losses, ensuring long-term success in forex trading. Your risk management strategy will depend on your risk tolerance and account balance, but a thumb rule for all investors and traders is to have a diversified portfolio of assets.
3. Volatility, liquidity, and leverage
Of all the essential things to know about forex, some technical terms and vocabulary will be the building blocks of your knowledge.
What is volatility?
Volatility is a measure of the price fluctuations of assets over a given period of time. While it can help traders gain profits quickly, it is also a risk that may lead to losses and hence needs to be mitigated.
What is liquidity?
Liquidity implies the level of activity in the market. In forex trading, liquidity is the ease with which a currency pair can be bought and sold on demand without causing much impact on their exchange rate. Major currencies usually have high liquidity, as opposed to minor or exotic currencies.
What is leverage?
Leverage is when a trader uses borrowed capital to invest in an asset. In forex, you’d usually borrow short-term from the broker to be able to trade larger positions. Mankasj Jain habitually reminds traders that forex leverage can increase their potential profits, but also amplifies the risks. Leverage responsibly and set up stop-loss orders to avoid major losses, and always watch your margin levels!
4. A robust trading strategy
A well-defined trading strategy is a cornerstone of profitable forex trading. Mankash Jain advises traders to develop a systematic approach, which should align with their individual goals, risk tolerance, and trading style. A comprehensive trading strategy includes elements such as entry and exit criteria, risk-reward ratios, and money management principles. Both fundamental analysis and technical analysis are crucial to developing a robust trading strategy.
5. Market news and analysis
Fundamental analysis assesses the impact of economic and geopolitical factors on the market, and technical analysis evaluates historical price data to determine future trends. By monitoring market news and conducting analysis, traders can identify potential trading opportunities and adjust their strategies accordingly. Engaging with reliable sources of information and leveraging technological tools can enhance a trader’s ability to make accurate predictions. Keeping a finger on the pulse of the forex market is therefore crucial for making informed trading decisions.
Remember, success in forex trading requires dedication, discipline, and a commitment to continuous improvement. By understanding the fundamentals of forex trading, managing risk effectively, developing a robust trading strategy, and staying updated with market news and terminology, traders can enhance their chances of achieving profitability and building long-term wealth. By implementing the insights shared by FX expert Mankash Jain, you can also navigate the forex market with confidence and increase your chances of achieving your financial goals.
About Mankash Jain
Mr Mankash Jain, a highly accomplished CEO and FX expert with over 20 years of experience in the financial industry. With a consistent track record of achieving high returns, he has held various key roles, including Head of FX, head trader, project manager, consultant, and economist, across multiple institutions covering international financial markets. He is currently CEO of Ten Rings, an investment management and research firm catering to private clients and institutions, and Director at Grand Pad, a North West London-based business specialising in bespoke ultra high-end property build and refurbishments. He lives in London, England. Mr Jain is also a Private Equity Investor with several investments in Tech-based Apps and Businesses and is a Director at Grand Pad, a North West London based business specialising in bespoke ultra high-end property build and refurbishments.
You can contact Mankash for appointments if you want to consult with a leading expert or receive one-on-one advice that helps you unlock your financial potential. Mankash also recently launched an Art and NFT Fund Investment and London 15, a property fund manager.