By Cedric Welsch
You may have heard about the excitement of Forex trading, and feel you would like to be involved, but have no idea where to start. It would be helpful for you to have a Forex trading guide, to explain the basics of trading on the currency markets. There is the potential for big profits, but it is essential to know what you are doing.
The Forex market is a non stop electronic cash market, where international currencies are bought and sold round the clock. Market conditions and exchange rates are liable to change constantly in response to real time events. Your goal in Forex trading is to profit from the movements of currencies against each other, and trading is always done in currency pairs, for example EUR/USD.
The first currency named in the pair is referred to as the base currency, and the second as the counter or quote currency. The value of the base currency in the exchange is always 1, so an exchange rate for EUR/USD of 1.2803 means that 1.2803 US dollars must be paid to obtain 1 euro. In Forex trading you buy and sell currency pairs, so when you place an order to buy the EUR/USD, you are buying the euro (the base currency) and selling the dollar.
The majority of currencies are traded against the US dollar. After this, the four next most traded currencies are the euro (EUR), the yen (JPY), the UK pound (GBP), and the Swiss franc (CHF). These five currencies are referred to as “The Majors”.
In order to make a profit, it is important to buy or sell a pair only when you expect the currency you are purchasing to increase in value against the one being sold. If it does, you have to sell back the other currency, so as to lock in your profit. An “open trade” or an “open position” is one where the trader has bought or sold a currency pair, but has not yet closed the position by selling or buying back the equivalent amount.
One of the main things you will need to learn from a Forex trading guide is how to judge what the movements of currencies are likely to be, in order to make profitable trades. This involves being able to identify trends, and you have to learn to recognize and predict market trends if you are going to succeed in Forex. There are several techniques that are used, including “moving averages”, and graphs called Bollinger bands. If three or four of these indicators point in the same direction, this helps you to know it is right to make a trade.
As you can see, there is quite a lot to learn from a Forex trading guide, all of it incredibly exciting. You cannot possibly learn it all at once, and you cannot learn it all before you start. You can only really learn by getting involved. The important thing is to find the right Forex trading system, so that you will be able to learn step by step, and make a profit at the same time.
About the Author
Peddling within the boundaries of the forex trade arena is a highly dangerous game to play.
Thousands of hopeful investors in the foreign exchange market are still peddling tirelessly.
