Learn Forex Trading

In the Forex Market, currencies are traded in pairs. You cannot buy or sell a single currency without doing the opposite on another. For example, in the EURUSD, if you buy EURO, you will simultaneously sell the USD and vice versa. In the same example, the first currency is called the base currency and the second is called the quote currency. At any given point of time, you have to buy/sell currencies in pairs.

Further Explanation

When I started, I remember buying when I wanted to sell and selling when I wanted to buy. This was my initial lack of understanding of how the currency transaction worked. It lead to a few small time losses for me, but lead to learning an important lesson. This is in reality the foundation course for trading in the forex market. Without understanding the organization behind the game, you will not be able to go far.

For a long time, until the EURO came in, the US dollar was the major currency in the currency market and every other country’s currencies were quoted in reference to the U.S dollar. This, in my opinion is still the same today, except that the intensity isn’t what it used to be.

Amongst the major currency pairs traded in the Forex market are the EURUSD, GBPUSD, USDJPY, USDCHF and AUDUSD. As I mentioned earlier, these currencies are traded in pairs and hence, buying and selling occurs simultaneously. Who paired these currencies together? I guess the psychology of the market created the demand and supply and it lead to the pairing.

In addition to the above, the base currency is always a single digit monetary unit like 1 AUD, 1 GBP, etc. The base currency is always greater in value than the quote currency. The currency pairs also depict in the BID and ASK fashion, where the base currency is BID and Quote currency is ASK. When you want to buy the base currency, you bid and when you want to sell, you ask for a price.

Technical charts play a key role in understanding the Foreign exchange market. To understand the market movements, to study the shifting psychology of the market, to gauge the strength of the bulls and bears, it is important you know how to read the charts. In the next few moments, I am gonna try and convince you of it’s benefits.

Forex Charts – The genesis of Technical analysis

The Forex market sometimes is a mind game. The action here is pretty fast and you need to be alert to be a part of it and to benefit. The most important part is being able to spot a trend and ride with it. Now, how do you recognize a market trend without handy info? This is where the charts come into play. The art of reading the charts is called Technical Analysis. The charts help you unravel the mystery of where the market is going. You can get minute by the minute picture or if you are a long term trader, the long term picture using a daily or weekly time frame chart. Technical analysis also helps you study the historical pattern of a currency enabling you to make some key predictions in the market movements. This ability is what separates the successful traders from the mediocre.

Characteristics of Technical Analysis

Usually, the charts are available from your broker you sign up with. The most popular free forex trading system software packages are MetaTrader and Dealbook 360. Each has it’s own restrictions like time bound usage, but can always be renewed.

The charts are offer real time data empowering you to watch the market movements live. You will updated tick by tick where the market is headed and can perform real time technical analysis. You can watch a currency in multiple time frames to understand both the micro and macro picture of a particular currency.

In addition to the bare charts, the software provides you with analytical tools like Indicators.

Some of the indicators are Relative Strength Index, Moving Averages, Convergence and Divergence, etc. They make the job of analyzing the market bit easier through pre-calculated mathematical formulas that are represented in visual format.

Technical Analysis literally decides your career in the market. If you are good at it, you will be undoubtedly successful. If you fail to read the signals the charts project, the future may not be bright for you here. Lastly, Technical Analysis removes the doubt and uncertainty from trading by providing precise information about the market movements.

Do not read me wrong. I meant Forex Analysis and not Forensic Analysis. Forensics is the art of dissecting the dead, while Forex is the art of buying and selling currency against another. My apologies if I confused you.

Alright, lets move ahead.

The Forex market analysis works just the way Stock market analysis does. Here it is all about the currencies, the factors that influence them, their movements etc. It is inevitably important for traders to learn the art of analysis if they want to succeed in this market. One also has to understand the fact that, it is an inexact science. The rules are very dynamic and work based on market psychology.

Are You Better Off Playing The Ponies?

Forex markets may remind one of Horse racing. Nevertheless, in horse racing, the liability is faster than in the forex market. If the jockey loses focus even for a second, he is sure to lose the race. It isn’t the case in the Forex market. The market movements are based on analysis of the situation. The reaction maybe fast, but the time taken to announce the news isn’t.

Certain people think that the forex market is safer than stock market because it involves money and everyone needs money. They believe the stock markets are not stable because not everyone needs a Hewlett Packard Share, while everyone needs money. The truth is contrary to this. The factors that affect the forex market are very sensitive and strong, like an earthquake, wars, recessions, inflation and other natural and man made disasters. Everything related to a country’s economy affects the forex market.

There are many commercial Forex analysis services today in the market. I explained this in detail in my previous post. Be careful who you go with. Follow the guidelines I gave in my last post. Follow trial and error to some extent, but always look for third party recommendations.

Get into online chat groups related to forex or join yahoo groups. By joining these communities, you can get better educated on the service available as well as new analytical trends in the market. It is important to stay updated always.

In addition to this, there are free services from reputed companies like Reuters, CNN, Bloomberg.com that provide on time market analysis. Their basic services are offered free of cost. These are companies that you can depend on all the time because they are all a household name. They simply can’t afford to cheat you.