How the Forex Rates You Get Affect Your Trading

Forex Rates Currency

When you start trading on the forex market you have to consider what forex rates you are getting.  Getting the best forex rates does help you with the success you have one the market.  It is important that you know how the forex rates affect your trading.  You should also consider the other aspects of trading that affect your success.

The Forex Rates You Get and the Broker You Use

The best forex rates can often be linked to your forex broker.  You need to find a broker who offers you good spreads on your trades.  If you do not have good spreads the exchange rates will not help you.  The spread is where the broker makes their money on the trade.  Stock brokers generally take a commission from a trade’s profit, but with forex any profit you make is your own after the spread is cleared.  The rate you get will be based not only on the market rate but the spread as well.  Bigger spreads mean less profit for you and less profit means a less successful trader.

How The Rates Affect Your Trading Emotions

There are a number of emotions that you have to control when you trade forex.  The most common of these emotions are greed, anxiety and fear.  The best foreign exchange rates can actually have a huge impact on these emotions and your mental state.

  • The rates can cause fear when they swing against you.  You have to make sure you are confident in your trading plan so that you do not make any decisions based on this fear.
  • Anxiety is often caused by the rates.  The constant fluctuations of the rates causes anxiety as you do not know what could happen next.  While it is possible to predict what an exchange rate may do you can never be certain as fluctuations occur all the time.
  • When the rates continue to go up this will affect your feeling of greed.  Greed is something most traders feel when the possibility of a greater profit comes about.  You have to control this as greed can cause serious losses when the rate swings and causes you to make silly mistakes.

Do the Rates Affect Your Strategy?

When you trade forex you need to have a trading plan and strategy.  You can only be successful when you have this plan and are able to stick to it.  The rates you are able to get can play a role in your trading strategy.  Many trading plans only take effect once rates reach a certain level.  This means that the best forex rates for you will differ from the best rates for another person.

If you are trading against the trend then the best rate is when everyone else thinks it’s the worst rate.  You need to keep track of the rates of the currency pair you want to trade at all times.  Only by doing this will you be able to determine a trend and predict what you should be doing.

Getting the best foreign exchange rates will help you make a profit.  However, they are not the only factor to consider when trying to be successful.

 

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