Forex strategy trading is an unusually money-making investment to get into. It is the exchange of foreign commodities internationaly sold for a profit determined by what the market us doing.
The market is originated by the individual speculators, the banks, and many other international corporations that make up the more than 4.3 trillion dollars of trading volume that takes place on a daily basis. On the other hand, there are still lots of people who are puzzled as to exactly what Forex trading is and how it works. As a result, in this short article I am going to explain it very simply so that you get the fundamental concept down.
With Currency Trading you buy currencies at an exchange rate for another currency, both currencies together are called a currency pair. To illustrate, you might exchange the Canadian dollar for the Japanese yen or you may exchange the New Zealand dollar for the Mexican peso.
You are going to use the American dollar as the unit to figure out what the value of the other currencies are, because the less the American dollar is worth the less of any international currency it will buy you. This rule applies to every other currency as well.
If the currency would get you less in US dollars then the currency isn’t worth that much.
What you are trying to do with Forex strategy trading is make what it known as a pip. a pip is the smallest movement a currency pair can make. Decimal format is utilized to assess the exact exchange rate for currency pairs internationally.
To be more specific, a US dollar might get you 1.5617 Euros. You make a profit when the number moves up a point(or a pip). The more this number moves up the more pips you make. A pip can be a unit of twenty dollars, ten dollars, or less depending on what type of account you are playingtrading with and the size of the lot.
Trading the foreign currency is not like the stock market where they are dictated by the SEC. In Forex most of the trading is done through online trading platforms and a network of banking brokers.
A big part of the money that is exchanges comes from only five percent of the market banks and big companies.
The other 95% comes from smaller market players who may have a few thousand dollars in their account to play with.
Of course there is a lot of technical jargon involved like, Fibonacci retracement, which tells you where the level at which a market trend will break, and fundamental analysis which simply means information you are fed over the news.
These kinds of terms frighten a lot of beginner foreign exchange traders, but trust me they are easy to learn and there is no reason why you can not pick them all up.
The main principle is to buy one currency at an exchange rate that will move up enough in value to be able to buy more of a currency which is worth less now because of the boosted value all centralized around the US dollar.
The 0.0001 example I gave above is spot on for most of the major markets, but for the smaller ones sometimes the price might be measured differently.
I hope this article has been useful in assisting you to comprehend just how Forex strategy trading works.
To your success,
Jay Molina
Senior currency trader & coach