With the unique opportunities and profits to be made, many are looking to switch completely from cryptocurrencies to Forex. In this post, you'll learn how to make that transition.
February 13, 2019 | AtoZ Markets - You are probably reading this post because you have made some money trading cryptocurrencies, Bitcoin, Ripple, Ethereum and the rest and now you are thinking of delving into the Forex market.
Now that you are thinking of transitioning into Forex, we have outlined 4 important points that will help you switch successfully.
1. Look At The FX Market As Two-Way
The crypto market, as you may have known, is very much a one-way street. Some who have made profits did that from buying at a low price and getting on that explosive rally and then sell off to bank some profit when the price starts falling.
However, Forex is very much two-way. You have a short position as well as long position and, the first thing you need to do is to understand both concepts. While you can make money from the rising and falling crypto market, it is quite different in FX market as you cannot make money in both ways. Hence you need to start thinking of a chart as being profitable when it is falling or when it's rising.
If that is hard for you to do, there is software out there that flips charts for you. Australian master trader, Darryl Guppy recommends this practice as an excellent method of determining whether you are biased in your examination of the chart.
So if the chart is falling down and it seems you can’t make money from that, you can flip it on its axis, so it looks going the other way and then you can see how you can obviously make money. For example, if you are watching the EURUSD pair, you can plot it USDEUR to give you the same thing as well, but in reverse. With this method, you can see which direction the chart is headed.
2. Choose 3 Pairs
If you made gains in crypto trading because you were specialized in a couple of deals, you are going to make better money trading currencies by picking three good pairs like these; EURUSD, USDJPY, GBPUSD and any other like them and then become a specialist with them.
Love and study these pairs like you did Bitcoin or any other coin you've previously traded because that will be where your edge lies. Doing that keeps you several steps ahead of traders who are trying to study all the currency pair.
3. Put Together A Trading Plan
With cryptocurrencies, you probably have a strategy of buying when there is a pullback in price so you can sell when it rises.
However, when it comes to currency trading, having a trading plan and sticking to it contributes to the overall success of a forex trader because it gives you a set of proven rules or strategies to apply even when your emotions are trying to make you trade out of impulse.
4. Stick With Momentum Strategies
Whether you knew it or not, you have made some gains from momentum strategies. Hence you should find currency pairs that are exhibiting momentum. They are not going to be extreme as cryptos, but you'll still get aggressive uptrends that pause, pullback, test and then rise again just like crypto would do.
To achieve this, you should do the following;
- Identify momentum,
- Have a few strategies to trade that momentum
- Minimize your risk (think about WHEN you are going to exit if it doesn't work for you)
- Don’t Risk all your crypto gains
In conclusion, it is not advisable to take all of your crypto earnings and stick it into forex trading, with the thought that you did very well trading cryptos and the same will happen with FX trading.
Rather, work on building the skills you've garnered from crypto trading by putting in a small amount of money in your trading account. When you have thoroughly applied the 3 points mentioned above, and you feel like you've got some traction or grip on what's going on in the forex market, then you can start pushing in more money and hopefully, you'll find success in currency trading.
Think we missed something? Let us know in the comments section below