An Intern Learns – Change in Forex
Autumn is definitely on the way. There’s a distinct chill in the air in the mornings, a jacket is now needed in the evenings and the summer Olympics we were all looking forward to are soon to be well and truly finished. I have to admit I’ve always been a bit fond of change. A summer can seem to drag and winters especially so. After a hot and muggy summer it’s always a pleasant change to take out the winter coats and boots! Soon we’ll all be enjoying all the spoils of autumn – a myriad of falling leaves of red, yellow and ochre, hot stews in the evening and roast chestnuts and mulled wine – ok I’m jumping the gun a little now! Well things at MahiFX are changing too. As you know I am a new recruit and there are some others that will be joining our ranks soon. We also have some exciting changes coming to our website but I’m certainly not going to be giving anything away here!
I’ve certainly had to take some changes on the chin, particularly with having to come to grips with foreign exchange. As you may recall from my last post, this blog is chronicling my learning curve with forex. Sometimes even the simplest concepts can take some getting used to! Some interesting terminology I recently came across was a ‘bullish or bearish market’. Sounds a bit weird, like a trip to the zoo! Turns out this is not actually reference to a place where one could buy circus livestock, but rather a metaphor to describe the overall trend of a market, or even a sector of it. Think of it this way, a bull ready to charge shows aggression, confidence and authority. In this same way a bullish market is characterised by investor confidence that the market is in a state of growth. Conversely, a bearish market is one in a state of decline. I visualise a bear on all fours; aware of it’s potential but submissive and shy; walking away from a fight. A market is usually described as ‘bearish’ if it is in a generally declining state over a few months.
This change in the market between bullish and bearish states can cause all sorts of fun for traders. Essentially it is this fluctuation that investors are speculating on and the same changes that can cause profits and losses. Unfortunately these losses can sometimes be severe, but there are ways to try and curtail this.
On a platform such as MahiFX, you can place stop loss and take profit orders. Often one of the main reasons people are hesitant to begin forex trading is for fear of extensive losses. A stop loss order is designed to do exactly as it says. If a market moves against your favour and you incur losses, a stop loss will activate at a position you’ve set and immediately liquidate your position. This will stop your losses in their tracks. However it’s not all doom, gloom and losses – there are tools to secure your profits too. A take profit is effectively a ‘get out while the going’s good’ order. This limit order is set above the market (in a long position typically) and when a specific target is reached it closes and secures your profit.
So we can see that things change all around us all the time, and even more so in the forex world. However there are tools that can help us effectively manage these changes to our advantage. Using a stop loss will minimise your losses and a take profit will make sure you secure your profit before things go bearish in the market again!