Interested in how to make money on exchange rates but do not know where to start? Here you will find everything on how to make a profit on price fluctuations and manage your investments.
A few words about trading on digital options
Intro to trading
When we speak about trading, we mean buying or selling currencies, stocks, commodities and other assets. The main purpose of trading is not to own assets, but to make a profit on operations we perform with them.
The point is to capitalize on the difference between the buy price and the sell price of the asset. It sounds simple, but you need to learn how to trade because the trader receives only this one tool to generate income, and the amount of profit depends on it.
How much can I earn?
To make trading profitable, you need to learn to catch the constant trends found in emerging markets. The price of an asset is influenced by many factors.
In the end, your earnings depend on the quality of the analysis — were you able to see the trend in time and determine the moment for the trade.
How to start?
Why has the price changed?
The asset price, i.e. currency or stocks, goes up because of its supply increase.
Investors expect the asset price to increase, that is why they want to buy the asset at a lower price and sell it at a higher price later.
How to make money on a price change?
The value of all assets depends on the dynamics of supply and demand. That means that you can make money when the price of any asset goes up or down.
Make down trades when the asset price goes down. Make up trades when the asset price goes up.
What is the trend?
How do I trade on an uptrend?
An uptrend shows the upward trend in prices. If the chart goes up, that means the asset price goes up.
Buy an asset when the market goes up to sell it at a higher price later.
A downtrend shows a downward trend in prices. If the chart goes down, that means the asset price goes down.
You can track more complex signals — trend reversal times and points for entering a trade on a Japanese Candlesticks chart.
Bars – another type of a chart, quotes on it are displayed in the form of vertical codes. The lower boundary of the code corresponds to the minimum price, and the upper boundary — to the maximum.
Heikin-Ashi is a specially built candlestick chart. In fact, this technique averages price data to create Japanese candlesticks. To build a candle, we use information about the opening/closing prices of the previous candle and the information about the price change at that moment. Therefore, formally, Heikin-Ashi is an indicator, not a chart.
Flat, or a sideways trend in the market is a situation where the price for some period of time does not grow and does not fall.
What is a support level?
A support level is a level at which the value of an asset reverses and begins to grow. Visually it is a line that forms a barrier to further price reductions.
A resistance level is a level at which the value of an asset reverses and begins to fall. Visually it is a line that forms a barrier to further price growth.
The portion of the chart between levels of support and resistance is called a price channel. If the line moves horizontally along the channel, then this market condition is called a flat or a sideways trend.
Sometimes the line breaks through the support level. If the price line breaks through the support level and continues going down, a real downtrend forms in the market.
The chart periodically goes beyond the resistance level. If the price breaks through the level and continues to move up, an uptrend is forming on the market.
If the price channel between the support and resistance levels visually is going down, then a downtrend has formed in the market.
If the price channel between the support and resistance levels is visually going upward, then an uptrend has formed in the market.
What is risk management?
The atmosphere of indecision in the market, for instance, when the supply equals the demand, makes it hard to continue making the right decisions regarding price trends. This sometimes leads to losing trades.
You set a percentage of the deposit, usually 0.5 to 6%, and always make trades for this amount.
In the event of an unsuccessful trade, you increase the amount of the following trade to cover the losses. As soon as a trade closes successfully, you go back to the original trade amount and start over.
In the event of a successful trade, you increase the amount of the following trade. As soon as a losing trade closes, you go back to the original trade amount and start over.
What is the trend?
How do I trade on an uptrend?
An uptrend shows the upward trend in prices. If the chart goes up, that means the asset price goes up.
Buy an asset when the market goes up to sell it at a higher price later.
How do I trade on a downtrend?
A downtrend shows a downward trend in prices. If the chart goes down, that means the asset price goes down.
Sell an asset when the market goes down to buy it at a lower price later.
How to read charts
The Line chart
The analysis of the behavior of a chart allows one to detect patterns in price movements of an asset: whether it grows or falls, continues to move in the same direction or turns around.
The easiest type of chart to understand is the Line Chart. Every change in the price of an asset on it looks like a point. The points are connected and visually represent a permanently broken line.
It is very convenient to find trends and build trading strategies with the help of Line Charts.
Candlestick analysis
You can track more complex signals — trend reversal times and points for entering a trade on a Japanese Candlesticks chart.
To determine the best time to make a trade on a candlestick chart, focus on one or more candles. Each candle has an open and close price as well as a minimum and maximum price. The combination of these four factors determines when a trade is opened or closed.
Sometimes one or more candlesticks form combinations which are called candlestick patterns. Such patterns help to determine when to enter a trade and how the price will behave in the future.
What are Bars?
Bars – another type of a chart, quotes on it are displayed in the form of vertical codes. The lower boundary of the code corresponds to the minimum price, and the upper boundary — to the maximum.
Horizontal codes to the left of the bar - the opening price, horizontal codes to the right of the bar — the closing price. Sometimes the opening price of a bar cannot be found.
Bar Charts are similar to Candlestick Charts and actually contain the same information as candlesticks charts. Green bars indicate that the price of the asset has been increasing. Red bars mean that it has been falling.
Heikin-Ashi
Heikin-Ashi is a specially built candlestick chart. In fact, this technique averages price data to create Japanese candlesticks. To build a candle, we use information about the opening/closing prices of the previous candle and the information about the price change at that moment. Therefore, formally, Heikin-Ashi is an indicator, not a chart.
Heikin-Ashi smoothes price fluctuations and simplifies the analysis of trends, which means that using it makes it easier to find the opening and closing times of trades.
Is it worth trading flat?
Flat, or a sideways trend in the market is a situation where the price for some period of time does not grow and does not fall.
Price movement in a flat, as a rule, is short. Therefore, a flat is a signal to the trader that now is not the best time to make trades.
However, only 30% of the time the market is trendy and has a good strategy, you can make a profit during the other 70% of the time.
The best strategy of a flat is trading using support and resistance levels. If the price is approaching the support level top down and touches it, open an up trade. If the price approaches the support level bottom up and touches it, open a down trade.
Support and resistance levels
What is a support level?
A support level is a level at which the value of an asset reverses and begins to grow. Visually it is a line that forms a barrier to further price reductions.
It is based on price minima, that is, on the lower peaks in the price change on the chart
What is a resistance level?
A resistance level is a level at which the value of an asset reverses and begins to fall. Visually it is a line that forms a barrier to further price growth.
It is based on price maxima, that is, on the higher peaks in the price change on the chart.
Sideways trend
The portion of the chart between levels of support and resistance is called a price channel. If the line moves horizontally along the channel, then this market condition is called a flat or a sideways trend.
If the price has bounced off the support level, make up trades. If the price has bounced off the resistance level, make down trades.
Level-of-support breakthrough
Sometimes the line breaks through the support level. If the price line breaks through the support level and continues going down, a real downtrend forms in the market.
When the line crosses the support level going down, make down trades.
Resistance level breakthrough
The chart periodically goes beyond the resistance level. If the price breaks through the level and continues to move up, an uptrend is forming on the market.
When the price chart crosses the level of resistance bottom up, open up trades.
Downtrend on support and resistance levels
If the price channel between the support and resistance levels visually is going down, then a downtrend has formed in the market.
It is preferable to trade in the direction of inclination. Open a down trade when the price chart touches the resistance line bottom up.
Uptrend on support and resistance levels
If the price channel between the support and resistance levels is visually going upward, then an uptrend has formed in the market.
It is preferable to trade in the direction of inclination. Open an up trade when the price chart touches the support line top down.
Risk management
What is risk management?
The atmosphere of indecision in the market, for instance, when the supply equals the demand, makes it hard to continue making the right decisions regarding price trends. This sometimes leads to losing trades.
A few simple risk management rules exist to help minimize losses.
Risk management is a set of rules that determine trade amounts and limit the trader’s total trade volume. They exist to save the original deposit regardless of the trade’s outcome. There are three basic systems: fixed amount trading, the Martingale system and the Parlay method.
Fixed amount trading
You set a percentage of the deposit, usually 0.5 to 6%, and always make trades for this amount.
If you are a beginner, stick to 0.5 - 1% of the original deposit. If you already have trading experience, you can make trades between 2 - 6% of the deposit.
One important thing is to avoid making trades of 10% or more of your deposit. If in one second, you lose 10% or 20% of the original amount on your account, it becomes hard to recover from the loss.
Martingale
In the event of an unsuccessful trade, you increase the amount of the following trade to cover the losses. As soon as a trade closes successfully, you go back to the original trade amount and start over.
For example, you open a trade for $1 and your prediction is incorrect. Next you open a trade for $2 and it fails again. Then you increase the trade amount to $5 and your prediction is successful. This way, you not only recover the losses on previous transactions but earn money. Usually, Martingale consists of 4 - 7 steps.
Parlay
In the event of a successful trade, you increase the amount of the following trade. As soon as a losing trade closes, you go back to the original trade amount and start over.
The system contains 2-3 steps. This method enables you to invest your profit in the trades that follow and build on your deposit faster.
End
The end,it seems alot to take in at first but it is pretty easy. Loss is common in this market but take your time and watch the graph for 5 - 10 minutes you should be good.
