How to choose a profitable Forex asset?
We are sure that at least once in your life you have heard the expression: "Real money is only in trading." There are many components of trading in the foreign exchange market, but one of the secrets of a stable profit on Forex is the ability to correctly choose a trading asset.
It can not be denied that today fundamental analysis has more weight than technical, but if you do not draw proper attention to the choice of trading tools, the plans will collapse. Also, it is difficult to compete in the market using chart analysis, but with the right asset, this is much more realistic.
With all that, novices often choose a currency pair or another tool, which leads to quick money, but it will be also used up just as quickly. And, it is a good technique for short-term trading, however, if you want to "get on the road" of long-term stable earnings, approach the issue more carefully.
What should you pay attention to when choosing a trading tool?
- Volatility (the price range and timeframe);
- Correlation with other Forex assets, as well as related markets;
- Credibility of the sources of fundamental data;
- Technical parameters of a broker’s trade (spreads, swaps, commissions, etc.), if they are specific for various trading tools;
- Complexity of technical analysis performance.
To analyze the volatility, use the special online services, which are designed for this purpose. There are many of them in free access; you only need to choose the format most convenient for you. Note that volatility can be:
- efficient, or trend;
- speculative – which does not affect the market direction;
- long-term and short-term;
- technical and fundamental.
Also, the price fluctuations are different for large and small trading volumes.
Which period is important?
Carefully check all this information before investing money in Forex. Analyze the data for several previous years to check how dynamic the price is in different seasons and under the influence of external economic factors. Be sure to compare the data with the fundamental analysis.
Volatility over the past year has the greatest value for the trader, so that it can be divided into months or smaller periods. If you are not confident in your abilities, test, for a start, your skills on a demo account. When you are fully convinced that you are ready to trade on real Forex and are ready to make big money, open a real account.