Forex Trading Market Basics



More recently, forex trading has been considered among the elite big players. But times are changing: today, almost anyone can try their hand at speculating on the difference in exchange rates, and you don’t need an impressive amount of capital to do so.

What do you need to do successful forex trading?
The main principle of forex trading is to buy a currency at a lower price and sell it at a higher price, making a profit on the difference. But despite its speculative coloring, Forex is not a game of luck but a strenuous activity.

How to trade in the forex market

There are two main types of trading in the forex market. The first is simple; buying and selling of currency pairs when one currency is bought at the expense of another. The second way is to buy derivative financial instruments (derivatives), the value of which changes with changes in exchange rates.

The most common option is to buy and sell currency pairs, similar to trading shares on the stock market. In this case, expect the exchange rate to change favorably. If you open a long forex position, wait for your partner’s rate to go up. For example, you have opened a long position on the USD/CAD pair. This means that you will make a profit if the rate of the currency pair goes up and you will lose money if the rate goes down. The rate rises if the base currency rises in price compared to the quoted one, that is, in this situation, we bet on the US dollar.

Another way to trade the forex market is to buy derivatives, such as options and futures, to profit from changes in exchange rates. If you buy an option on a currency pair, you have the right to buy that pair at a set price before the expiration date. On the other hand, a futures transaction imposes an obligation to buy a currency at a certain time. Generally, these types of trading are used only by experienced traders, but even for beginners, it is essential to at least be aware of these opportunities.

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Intraday Forex trading or scalping

This reasonably young forex trading system has gained popularity among both beginners and professionals. The strategy was designed for short-term trades lasting from one second to several minutes. It is suitable for traders who do not have impressive initial capital.
When you trade intraday for a transaction, you won’t lose much, but be careful not to get carried away with frequent and short trades. A short-term strategy is riskier than medium-term forex trading, and a long-term one, according to statistics, brings more profit. Do not forget that frequent and insignificant losses can lead to a big inconvenience. This strategy works, but must be followed carefully.

Night forex

If you like more relaxed and leisurely trading, you can pay attention to such a method as “night” Forex. For example, if you trade at night from 00:00 Moscow time, you will find almost complete calm in the market. At the moment, practically all the major players (US and Europe) are “asleep”. Only Japan is “awake”. Therefore, sharp price fluctuations only occur in pairs with the yen. For other currencies, volatility during this period is negligible. Thus, the rates change slowly, which allows for good profits with “quick deals”. “Night Forex is suitable for pipelines, and here you can successfully work on a floor. The South African currency market can also be interesting. You can check ZARUSD rates on ZA Forex brokers.

Forex news trading

Many factors influence exchange rates: from the economic situation of the country and various fundamental indicators (GDP, inflation, unemployment, among others) to statements by high officials of the state, natural disasters, etc. And if you learn to understand what consequences this or that news can bring, trading with Forex news can become the key to your success.

Currency trading programs

For currency trading to be successful, you need to be fast: know the quotations of currency pairs, be aware of the latest market news, analyze them and conclude relevant and profitable deals on time. It is clear that doing all this on your own is almost impossible, so most traders use mechanical trading systems, that is, special computer programs for trading in Forex, which allow you to make transactions, analyze incoming market information and give a signal for action. . .

These programs are called trading platforms or trading terminals. They are applications for a computer or smartphone and usually have a set of technical analysis tools, email, show trading center news and more. There are a large number of such programs for trading Forex, and they can be easily found and downloaded on the web. Almost all of them are created according to the same principle, and therefore, having mastered the functionality of one of them, you will be able to work freely with the others. The most popular forex trading programs are Meta Trader 4 and Meta Trader 5.

These products are designed to make trading more accessible, but don’t expect it to make the right decisions for you. The platform needs constant tracking and monitoring of the parameters of its work. Remember that mechanical trading systems help the trader but do not work for him. Thus, most traders use multiple terminals to get the best technical, fundamental and IT analysis of their activities.

Forex trading is deceptively associated with an easy way to make a profit. It takes a lot of effort to become a professional trader. This is hard work that requires serious training.

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