Learning the Forex Basics
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Forex stands for foreign currency exchange market. This market is different from the stock market as it has no central locations with a trading pit. It’s completely online. All trading is done over the net without the use of the crazy pit people placing the trades.
The forex is open much longer than the stock market. It’s open 24 hours a day. This market is world wide with people trading in North American, Europe, Asia and abroad. This market is massive. Every day it’s open, trillions and trillions of dollars are traded. This is many times greater than the stock markets.
Here are a few more basic details:
1. When trading, you are buying and selling currency pairs. For this reason, currencies are quoted in pairs. For example, the pair of U.S. Dollar and Japanese Yen can be quoted as USD/JPY equals 105.53, which means that 1 USD can buy 105.53 JPY.
2. Currency pairs, say USD/JPY, has a base. It is always the first of the two pairs. Most of the pairs have the USD as its base.
3. When the price of a pair goes up, it means the base of pair has gone up relative to the counter currency. So, if the USD/JPY quote was 100.33 but is now 105.53, then this means that the dollar has strengthened because 1 USD can now buy 105.53 JPY as opposed to the mere 100.33 JPY it could buy beforehand.
The idea of trading forex for a living is getting more and more popular. Trading software has become a key part to these people making a living from forex trading. This market is open to pretty much everyone and is so easy to access as mentioned previously. Although popular, it is not a market to just jump into. Having the right tools is key to your success. Make a wrong move with this and you’ll be losing money fast.
You make money in the foreign exchange by trading one currency pair for another. Like stocks, you buy low and sell high to make profits. The time you hold a trade may be a few minutes, hours, days or months. It all depends on your trading style you’ve decided on and more importantly, the trading software package you are using.
Today, there are some really amazing technologies that will make you a successful Forex trader. Learn about the one I use by clicking on the image below.
Regards,
Hector Breton
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Hi Hector,
Thanks for laying out the basics of forex in such a clear manner. I think that most people never get into forex because first they don’t understand how forex works, and second because they don’t realize how much money can be made in the currency exchange market. The fact that it can be automated is ahuge plus. I’ll be looking forward to a discussion about how the automated software works.
Regards, Tim
Tim @ Stock Trading System´s last blog ..penny-stock-prophet-review
Hector,
A very good overview of automated forex trading basics. As you know while automated forex systems are popular there are still many traders who like the hands on feel and control they have using a manual system. It does work if you have the time to spend daily to place and exit trades.
For the more progressive traders there are the better automated forex trading systems. I’m sure they will become the norm in time. New ideas often are rejected by the masses until they see just how useful they are. I’m with you auto trading is where it’s at.