Forex currency trading is becoming increasingly popular as more and more traders want to take their shot at the largest trading market in the world. The lure of nearly $2 trillion in trading going on each and every day is too much for most traders to resist.
So what is the Forex market, and how does currency trading work? Forex is an abbreviated term for foreign exchange market. The Forex is the largest financial market in the entire world, with an average trade volume of nearly two trillion dollars per day. The modern Forex market is what evolved from initial currency trading.
The idea is to use fluctuating currency rates to make money out of money. For example, let’’s say you buy one mini lot (1 mini lot = 10,000 currency) of the EUR/USD at a rate of 1.1500. Two days later the markets shift and the EUR/USD is now 1.1525, and so you decide to sell. Using the formula to figure out profits/losses, 1.1525-1.1500 is .0025 * 10,000 (the size of the mini-lot) = $25. In this case, a $100 investment for one mini lot yielded a $25 profit, or 25% in only two days. Not a bad percentage by any count. That’’s quite a profit for two days.
This is a simplified example, and as with any trading there is always the chance of loss, but this gives you an idea of what traders are shooting for when investing in Forex currency trading and why the potential for profits is so high. Forex currency trading is conducted using “pairs.”
The reason for this is that to trade Forex you are basically simultaneously buying one of the currencies, while selling the other. If you are selling the EUR/USD pair, then you are selling Euros in order to buy dollars.
Let’’s use the earlier pair as an example. If you are trading the Euro versus the US Dollar, your currency pair is EUR/USD. The Euro (EUR) is referred to as the base currency while the US Dollar (USD) is referred to as the cross currency. The base currency is the one you are selling, while the cross currency is the one you are buying.
There always has to be a pair. To buy one currency, you have to do it with another. To sell a currency, you need to get your profits back in another. There must always be two currencies in any Forex currency trading.
The far majority of the Forex trading done in the world takes place between eight currencies: the United States Dollar (USD), Australian Dollar (AUD), Great Britain Pound (GBP), Canadian Dollar (CAD), Swiss Franc (CHF), Japanese Yen (JPY), and the Euro (EUR). Other nations” currencies may be used, but these are the currencies that are most often used and profited from because they have the most demand and come from the most stable economies.
I hope that gets you started into learning about Forex currency trading, but you should know that you will always need a good proven system to make a profit in this volatile market.
About The Author
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From Jason Fielder - Founder, ForexImpact.com
Does The Perfect Forex Trading System Actually Exist?
By James Woolley
It’’s a well-known fact that many forex traders spend much of their lives seeking out the perfect forex trading system. With so much money to be made, particularly if you make full use of leverage, it’’s hardly surprising, but does this perfect system actually exist?
Forex forums are full of newbies asking about the best trading systems and how they can start earning lots of money from forex, but they”re usually brought back down to earth by the other more experienced forum members. This is because there is no such thing as the perfect forex trading system unfortunately.
On these same forums you will often read about the latest and greatest forex systems but almost all of these systems eventually end up failing, despite initially looking profitable. It’’s the same story with many of the commercial systems available online. They all have very impressive track records and look like very impressive systems on their sales page, but when you come to buy them, you quickly discover that they aren”t anywhere near as profitable as they claim to be. This is hardly surprising of course because if these systems were so profitable then they wouldn”t want to sell them to the general public.
The simple fact is that there is no perfect system. There are lots of systems that are capable of making a profit in the long-run, but even the very best systems will go through low periods and incur some losses in the short-term.
The key to being successful is to develop a system where the odds are in your favour for every single trade you make. This can be achieved by combining certain technical indicators so that you only enter positions where all your chosen indicators point in the same direction, so you can be confident in entering a long or short position.
You don”t necessarily need to trade a system with a high success ratio either. You can make decent money from forex trading just by developing a system with a 30 or 40% win ratio, for instance, if you have a solid stop loss policy and let your winning positions run.
It basically comes down to probabilities. If you have probability on your side for every trade you make then there’’s no reason why you shouldn”t make money from forex trading. You don”t need to constantly be on the lookout for the latest and greatest trading system. It’’s very often the simple tried and tested systems that are the most profitable in the long run.
Why ForexGen?
1. Lowest spreads in the market with 0-1 pips in 10 pairs, no commissions, no swaps and instant account Activation.
2. Scandinavian quality with Swiss precision, funds secured and local agents in 18+ countries.
3. ForexGen offers Forex trading in the major currency pairs and crosses.
4. Low capital start, with $250 as a minimum account size.
5. Liquidity and 24/5 availability are the characteristic factors of the Forex market compared with other financial markets.
6. ForexGen offers a free trial Forex demo account that allows you to test your skills and practice without risking real money.
1 comment:
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