Candlestick Trading Blog
September 18, 2007
Forex Made Easy
Starting A Difficult Topic Wow! Where did this title come from? We are going to discuss points about foreign currency trading but it is going to be difficult to turn this into “Forex made easy.” Forex is a complex, fast-moving and highly volatile form of trading and if we can help you understand trading Forex, maybe we will call that Forex made easy. For starters, let’s make a few basic points about Forex. What Forex Is By definition Forex is foreign exchange trading. This is when you buy or sell one country’s currency with another’s...that is the term “Forex” made easy! The profit you make is because of arbitrage. The Profit In Forex Is Arbitrage In the Forex markets, arbitrage is the taking advantage of a price differential between two or more currencies: a combination of matching deals are struck that capitalize upon the imbalance, the profit being the difference between the market prices. To break it down, when you buy a currency cheaply and sell it more expensively, the difference is arbitrage. Ok in our foreign currency for beginners efforts, it’s safe to say we now have both arbitrage and Forex made easy! Forex Is Widely Traded Forex trade is the most active form of trading in the world, exceeding all other forms combined. Because of the large volumes that are moved every day, Forex is highly volatile, meaning there are rapid price changes with all of the trading and investing. There are a huge number of investors that no doubt wish someone could have made Forex easy. Ticks and Leverage Ok, the last two things we’ll mention here. A tick isn’t a bug, the sound of a clock or a neurological condition; it is the minimum measurable movement in Forex trading. If you are trading Japanese yen, it will be a percentage. Likewise it will probably be .01 of one cent when trading US dollars. It may seem like an insignificant amount to worry about investment strategies until you consider leverage. Leverage is what makes commodities trading in Forex high-stakes. Frequently the minimum lot size is a thousand times its price; these kinds of ratios mean that you can lose a lot of money. I suspect that doesn’t fall under “Forex made easy” for you but rather under “Forex made scary!” Forex Made Easy – Some Basic Tips Like I told you before, Forex trading is complex, fast moving and highly volatile. It is difficult to say that anything can simplify this type of trading but here are a few tips to help you develop your investment philosophy. Forex Made Easy Tip #1 Make a trading plan. This is the form of trading most vulnerable to emotional influence and emotions will ruin many successful traders. You trading plan will help you map out your goals and strategies so take advantage of it. Forex Made Easy Tip #2 Research every trade that you are considering. Fundamental analysis will help you to create a strong understanding of the different currencies you consider trading. Do it every time. Forex Made Easy Tip #3 Use a trading system. A system like Japanese Candlesticks will help you to track the daily movements of your target currencies and find recurring patterns that will aid you in making more successful trades. Conclusion This probably is not the “Forex made easy” guide that you were hoping for. The “bad” Forex news is that nothing is easy when it comes to Forex trading. It takes planning, discipline and effort for successful trading. The “good” Forex news is that if you follow what I told you, you will improve the amount of successful trades you make. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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