Forex trading, or trading in foreign exchange, is basically a game of exchanging one currency for another with hopes of making a good profit. The forex market is vast as it has several currencies, yet the British pound sterling (GBP) remains one of the favourite trades, especially for traders in the UK, owing to a better understanding of the pound and the UK economy.
Trading the value of a currency pair – GBP pairs. Let’s take a closer look at why GBP trading is so attractive, what makes its value, and how to learn forex trading in the UK.
Why Trade Pounds Sterling?
The stability of the UK economy has made the British pound one of the most traded currencies in the world. Pairs like GBP/USD (British pound to US dollar) or GBP/EUR (British pound to euro) are highly liquid, meaning that at any point in time, there is always a will to trade, and buying and selling are much easier. For a UK-based trader, it makes sense only to trade the GBP since you are inherently more inclined to understand its local events and economic factors. Political decision news, financial data, and interest rates often directly affect the pound. With such a “home advantage,” you can anticipate moves better and act according to your determinations.Key Influencers of GBP
Now, prior you learning about forex trading in the UK, let’s take a look at some of the factors that affect the pound’s value. These will assist you in making smart decisions:- Economic Indicators: The employment numbers, inflation rate, and GDP growth. All three are vital indicators. As long as news comes out that is positive about the economy, the pound will go up if bad news like that begins to surface, the pound sinks.
- Interest Rates: The BoE controls interest rates, which directly affect GBP. An upward revision in interest rates will attract foreign investors to more interest-bearing accounts, thus strengthening the pound. An interest rate reduction weakens the pound.
- Political News: Political events like elections or news about Brexit can have a huge impact on the value of the pound. Political news updates always help predict big market movements.
- Global Economic Events: International trade deals, oil price changes, or shifts in the US or European economies can also impact GBP, especially in pairs like GBP/USD and GBP/EUR.
Best Trading Strategies for GBP
Now that we have an idea of what affects the pound let’s get to some simple trading strategies we can use when you learn forex trading in the UK1. Trend Following Strategy
This is trading in the direction of the current market trend. This can either be in the upwards trend, where you buy, or downward, when selling. For example, if the GBP/USD is up because of positive UK economic statistics, you buy and hold until the trend reverses. Keep very close tabs on the market and exit when it’s clear the trend is reversing.2. Range Trading Strategy
An effective range trading occurs when a currency pair moves within a defined price channel. For example, if the price of GBP/USD ranges between 1.3000 and 1.3500, you sell when the price touches the upper end of the range and buy at the lower end of the range. A breakout strategy is ideal if the market is stable and does not experience significant events that violently impact prices. With a breakout strategy, you enter the market when the price breaks above or below a given range. For instance, if the GBF/USD breaks above 1.3500 while vital economic news is released, you’ll go long hoping that the price will keep on going. A breakout quite often occurs following significant news, such as interest rate changes.Learn Forex Trading in the UK
First, one should understand the basics before jumping into live trading. Luckily, there are copious free resources to get you to learn forex trading in the UK. Forex trading courses online free and tools are specialised for UK traders.Free Forex Trading Courses
By taking forex trading courses online free, one is likely to learn a lot. These usually include some essential top courses in them:How Forex trading works
- Reading and Analysis of Forex Charts
- Some basic strategies of trading.
- Risk Management to Minimize Loss
Meeting Your UK Experts
A good source for learning purposes is getting in touch with established traders. Sites like forexsignals.co.uk make available live trading signals, mentorship, and social trading rooms based on community to learn from other people. UK-based experts tend to possess in-depth knowledge of the local factors influencing the economy of the nation that influences GBP; this knowledge comes in handy when doing pound-related pairs.Tools to Improve Your Forex Trading
Perfect trading in the forex market only occurs with the necessary tools to analyse a trend, manage risk, and build informed decisions. Useful tools that are available on websites such as forexsignals.co.uk include:- Forex charts: Visual Analysis of price movements to define trends.
- Profit calculators: Calculate the possible profit or loss before you trade.
- Pip calculators: Use them to determine how many “pips” your prices moved, which is usually the smallest unit in the forex market.
- Margin calculators: Calculate the margin of your trades.
