Forex Trading is trading currencies from different countries against each other. Forex is acronym of Foreign Exchange.
Forex trading is the act of simultaneously buying one currency while selling another, primarily for the purpose of speculation. Currency values rise (appreciate) and fall (depreciate) against each other due to a number of factors including economics and geopolitics. The common goal of Forex traders is to profit from these changes in the value of one currency against another by actively speculating on which way Forex prices are likely to turn in the future.
This is similar to stock trading. A stock trader will buy a stock if they think its price will rise in the future and sell a stock if they think its price will fall in the future. Similarly, a forex trader will buy a currency pair if they expect its exchange rate will rise in the future and sell a currency pair if they expect its exchange rate will fall in the future.
This knowledge will assist them in understanding how currencies compare to one another and help to increase their chances of experiencing significant returns.
How to trade FOREX
The two main ways to trade in the foreign currency market is the simple buying and selling of currency pairs, where you go long one currency and short another.
The two main ways to trade in the foreign currency market is the simple buying and selling of currency pairs, where you go long one currency and short another. The second way is through the purchasing of derivatives that track the movements of a specific currency pair. Both of these techniques are highly similar to techniques in the equities market.
The most common way is to simply buy and sell currency pairs, much in the same way most individuals buy and sell stocks. In this case, you are hoping the value of the pair itself changes in a favorable manner. If you go long a currency pair, you are hoping that the value of the pair increases.
For example, let’s say that you took a long position in the USD/CAD pair – you will make money if the value of this pair goes up, and lose money if it falls. This pair rises when the U.S. dollar increases in value against the Canadian dollar, so it is a bet on the U.S. dollar.
Trading foreign exchange on the currency market, also called trading forex, can be a thrilling hobby and a great source of investment income. Here are some tips in trading forex:
- > Start trading Forex with a demo account
- > Determine what currencies you want to buy and sell
- > Look for different brokerages
> Understand how to calculate profits.
> Understand basic Forex Terminologies.
FOREX trading strategies
Countless Forex trading strategies have been invented over the years, some relying on technical use of charts and numbers and others relying on a fundamental understanding of the market with reference to current events.
Some have become very popular while others are only used by a minority of traders. These trading strategies range in different levels of complexity. Some of the most widely used Forex strategies include: The Drop n’ stop trade, Pop n’ Stop Trade, London Hummer trade and more.
The forex fractal is not just a strategy but a concept of market fundamentals that you really need to know in order to understand what price is doing, why it is doing it, and who is making it move.