The foreign exchange market is booming, but traders can risk serious losses without proper education
Foreign exchange or forex trading has grown rapidly over the last few years. According to the Bureau for International Settlements, average daily forex trading in April 2013 (the most recent figures available) was $5.3 trillion a day, an increase on the $4.4 trillion that was traded daily in 2010. Even before the economic crash, the figure was just $3.2 trillion in 2007.
Forex offers traders the opportunity to trade in a large, highly liquid market which features low costs and great flexibility. It’s little surprise then that so many people and institutions are entering this exciting market. However, like any form of trading there are inherent risks. Those who are not prepared or properly informed and educated could find themselves in trouble.
It’s this lack of education that concerns Abdullah Abbas, managing director of Orbex, a well-established, multi-award winning forex broker. Orbex has an extensive education programme. Mr Abbas cites money management in particular. “It’s probably one of the simplest of topics and yet it’s often ignored,” he says. “A good trading education should always start with money management. With good experience of money management, traders with even a 48 per cent win rate from their trading system can turn their equity into the positive.”
Along with its competitive trading terms and conditions in the market on major currencies and other instruments, Orbex offers a diverse range of products including foreign exchange, precious metals, future contracts (over the counter), equity indices (over the counter), contracts for difference and energy contracts on the MetaTrader platform. But very importantly, Orbex offers its users essential education that can help them to manage their risk and improve their returns.
“At Orbex, we strive to provide top-notch educational resources, while making those resources available through a multitude of channels,” says Mr Abbas. In addition to free e-books, Orbex offers daily fundamental and technical analysis to its traders via a blog. It updates its daily Orbex TV, a service that gives a rundown of the markets.
For traders who are just getting into forex trading, the company offers numerous tutorials and step-by-step educational videos, in addition to a live-chat facility with its analysts. Currently it has bi-weekly webinars in English and Polish, and offers all educational materials free of charge.
It’s clear that customers appreciate a level of support that goes above and beyond what most platforms offer. “So far the feedback has been overwhelmingly positive,” says Mr Abbas. “Traders, both novice and seasoned, have found the material extremely useful and continue using our site daily. All the feedback we’ve received is praising the quality of the content offered and we will continue to invest time in making our educational resources the best on the market.”
A good trading education should always start with money management
He firmly believes that traders need to be aware of the fundamentals of trading. “There are many traders who strongly believe that price discounts everything and thus tend to ignore the fundamentals,” says Mr Abbas. While this may have been true in the past, he points out, recently central bank monetary policies have started to influence the currency markets directly. “Turning a blind eye to the fundamental events that shape the underlying markets can prove to be disastrous. You might get lucky a few times, but trading on luck is similar to gambling,” he says.
Education also concerns the trading system a trader chooses. Whether they trade with indicators or price action, traders need to develop familiarity with their approach. This ensures that trades are not prematurely closed or that those who have made losses don’t allow extensive runs in the hope that the trade will turn around.
The world is an increasingly uncertain place economically and politically, and so effective risk management along with a good understanding of the markets is more important than ever. “The recent volatility in the currency markets has brought to light the importance of managing risks, not just in terms of position sizing, but also the entire aspects such as using proper leverage and having good risk control practices in place,” says Mr Abbas.
Most traders tend to focus on the profits, when they should in fact focus on the risks, he argues. “For example, trading purely based on a 1:2 or even higher risk-reward does not mean you will be rewarded with profitable trades. In most cases, some of the worst risk-reward trades tend to have a higher probability. It all comes down to managing your risk and the familiarity with your trading system.” Before taking on a trade, traders should always ask themselves whether it is worth risking a particular amount and whether this sum is appropriate to their risk exposure, he says.
Mr Abbas concludes: “We’re staunch believers in financial literacy and we take it very seriously. We also believe that forex education should be free, concise and not misleading, which is why we are offering all our educational materials to anyone interested in trading, to help our traders make better investment decisions.”
For more information please visit: https://www.orbex.com/