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Trading in the foreign exchange market, or the forex market, is the most popular form of trading in the world. Trading currency has been done for hundreds of years and it is historically the most profitable trading platform in the world – and this is why so many people take part in trading each day around the world.
However, trading is not without its risks and today we are going to discuss some of the reasons you need to be careful when you trade currency on the forex market.
It’s a big risk
The first and most obvious reason to take care when trading currency is the risk involved. Trading is a risky game because if you don’t sell or buy at the right time you could lose a lot of money. It is important before you jump in with a big buy or sell that you first take it slow and practice with smaller amounts. You can even try a practice reading floor that will allow you to trade with fake money and get you used to the process before you spend actual money in the field.
It can be complex
Trading is a complex game and this is why there are many people out there who teach it for a living. From the patterns and trends to different scenarios you can set up for your trading – there is a lot to learn and many different things to consider. Take your time to learn the theory behind trading currency and practice different types of trading to find the one that suits you the best.
You’ll have to pay tax
It is crucial to be aware that if you are to try and trade cryptocurrency you will have to pay tax. You can look at this 2020 tax guide to get an idea of how much you’ll need to pay here – but trading and profiting in the form of cryptocurrency is not a tax free thing. It is a good idea to research the tax and decide whether the profit you’ll earn makes this a worthwhile pursuit at all.
There are political factors
Politics and real world events always have a major impact on the value of currency. Let’s take the U.K. as an example; the minute that Brexit was announced across Europe, the value of the British Pound Sterling took a nose dive and has been struggling to regain its former value ever since. It is a great idea when trading to have one screen on your trades and one on the news. This way, as the news comes in you can see the real-time impact it has and you can learn to trade during these times to gain a huge advantage.
Timing is everything
Timing is everything when it comes to trading and if you don’t trade at the right time you will never earn money. It is important to be on the ball when trading and this means you can’t really do this while also doing a lot of other things. Concentrate because any small change in the trends can be your window.
Take on board these tips and trade carefully this year.