Posted on: May 9, 2021 Posted by: TigerWebs Comments: 0

Currency trading, foreign exchange trading, forex trading or Fx trading are just four different titles often given to act of investing in the currency exchange market. If you are interested in investing in the foreign exchange market, then you need to understand the seven currency trading basics:

1) What is currency trading?

Currency trading is simply buying and selling currencies and making a profit from a positive price change between two different currencies involved in a trade. The two currencies involved in a trade are known as the forex pair. The most common currency involved in forex trading is the US dollar which is involved in 85% of all trades.

A forex trader will monitor the financial markets and react to trends in the movement in price between one currency and another. He makes a profit if he buys or opens a trade at a low price and sells or closes at a higher price. The skill is being able to understand what is happening in the market and correctly anticipate the upward or downward movement of currency prices. There are many tools available to help with the analysis of the market – the most common being a variety of charts which show historical trends and patterns. Increasingly, there are new trading software packages entering the market which automates much of this process (visit my blog for monthly reviews of such products).

2) The forex market

The volume in the foreign exchange market is massive, with around $4 trillion dollars being traded every single day. The international banks and financial investment companies are the main players but especially now with the internet and high speed connections, the market has opened up to the small private investors who are entering the market in their droves. The constant fluctuation in price between currencies provide a lucrative market for the shrewd investor.

3) Investment Capital

Just a few hundred dollars is enough to get started. You need to open an account with a broker but generally they do not charge any upfront fees or commission and make their money from the spread in buy and sell prices of the currency and from leveraging (visit my blog for more detail).

4) Trading hours

Because the currency market is Global, it is effectively open 24 hours per day, 5 days per week. It opens in Sydney Australia at 22:00 UTC on Sunday evening and closes at 22:00 UTC on Friday afternoon in New York.

5) Risk

Unfortunately, too many people enter the forex market and expect to get rich quick. Forex trading is not gambling, it’s a skill which can return good profits if you enter with the correct mindset and are prepared to learn the various tricks and techniques. In any form of investment where the potential profit is high, then so too are the potential losses. Even the most skilled and experienced traders will lose money and should not be put off when you do. The important thing is to make more gains than losses, so start small and learn from your mistakes. Always trade with a stop loss, particularly if you are using any form of automated trading software, this will protect you from huge losses if the market should suddenly turn against you.

6) Strategy and Systems

You need a clear strategy and to develop a profitable system within that strategy. Fear and greed are your worst enemies. Work hard at understanding the markets, study the charts and get a feel for the many factors which influence price movement. Persevere and above all be consistent.

7) You are in control

You are in total control of your investment. Unlike most other forms of investment such as stocks and shares, you are not dependent on the performance of a third party. So long as you learn the currency trading basics and learn to recognise the world events which influence currency prices then you are in a strong position to take advantage of positive trends in currency price movements.