Let’s take a look at what constitutes the best foreign exchange as well as a handful of common misconceptions.
How can you discover the best foreign exchange rate for your Forex trading requirements? What are some of the key factors that you will need to address when choosing the most appropriate service? These are important questions if you hope to objectively compare the market and your available options.
Let’s, therefore, take a look at ten common fallacies so that you can avoid making potentially costly mistakes when deciding upon a provider.
Less is Always Better
Some consider the best foreign exchange to be that which offers the lowest commissions and fees. However, we need to remember that such fees are often necessary to provide superior levels of service. In other words, try to avoid “free” exchange platforms.
Small Movements with Currency Rates Are Not Important
Even a few pips in either direction can have a massive impact upon your holdings, so always be sure to pay attention to such movements. These can also highlight any trends that might be observable from a longitudinal point of view.
The Best Exchange is the One with the Most Followers
While extremely popular exchanges might be able to offer more currencies of the world and a greater number of trading options, they may also suffer from superior levels of customer service due to the sheer number of traders. It could sometimes be better to utilise a smaller platform if you desire a more personalised experience.
The Most Traded Currencies are Always the Safest
The term “safe haven” is actually subjective when referring to the Forex markets. While the most traded currencies will often react less to economic changes, the fact of the matter is that large swings can still take place.
Political decisions, actions taken by a central bank and socioeconomic instability are three factors which can cause significant movements within a short period of time.
The Exchange Rate Today Will Predict What Happens Tomorrow
The current rates do not necessarily act as predictors of what may happen in the near future. If this were the case, all traders would win in the long run. While general observations can be drawn, never fall into the trap of believing that you know with any certainty what the near future has in store.
The Fallacy of the “Number 1 Currency”
There is no such concept as the “best foreign exchange currency” to use. Each denomination has its own set of strengths and weaknesses. ¨Try to maintain an objective opinion and to appreciate what each has in store. This will enable you to make unbiased decisions at the right times.
The Best Foreign Exchange Rates Only Apply to Large Traders
Search terms such as “top 0% foreign exchange” deals will often apply to those who trade large volumes. However, there may also be times when new customers are provided with similar bargains for a short period of time after the initial registration. In other words, keep an open mind and compare which platforms offer the most amenable package deals.
The Movements of a Foreign Currency are the Same as Its Domestic Counterpart
Relationships such as USD/JPY and GBP/EUR are often chosen due to their relative transparency and prevalence.
However, never make the mistake of believing that their movements are similar. On the contrary, the discrete actions of one will often be based on entirely unique scenarios. This is why it is important to appreciate the “big picture”.
The Most Traded Currencies Will Never Experience Lulls in Volume
The Forex market will inevitably ebb and flow as the result of actions taken by individual traders. This is why even major currencies will experience sluggish times as well as frenetic trading days. The key is to know when to act as well as when to wait and watch.
The Global Currency Market in Never Affected by Politics
While economics play a key role, we should also point out that political decisions can impact the value of a currency. One example could be if the United States invades the Middle East. This situation would normally signal a drop in the strength of the dollar.
So, be sure to keep an eye out for political events that could affect the Forex markets.
These ten suggestions clearly illustrate why it is important to perform plenty of research in advance. While finding the best foreign exchange opportunities is important, it is just as crucial to be prepared for any sudden movements. Patience, skill and experience are all traits of a good trader.
You could then be on your way to a successful Forex career!