FOREX Trading Guide-Free Tips Inside

Written By: admin on July 1, 2009 No Comment

FOREX or foreign exchange trading is the trade of currencies from different countries. There are many currencies around the world but there are only seven major currencies in /forex trading/ represented by their three-letter abbreviations namely the US dollar (USD), British pound (GBP), the Japanese Yen (JPY), Euro (EUR), the Canadian dollar (CAD), Swiss Franc (CHF) and the Australian dollar (AUD). For starters, be familiar with these names as it is vital in reading FOREX quotes.

FOREX quotes are listed in pairs such as EUR/USD wherein the first currency is called the base currency and the second is the counter. The base currency always has the value of 1. Right after the currency pair is an amount such as in EUR/USD 1.4200. This amount is the value of the base currency when traded with the second currency. In the given example, one Euro is equal to 1.4200 US dollars.

Another reading would consist of a pair of currency and a pair of values such as in EUR/USD 1.4200/1.4210. This time we have two values on the right. The first value is what we call the ‘bid’ and is the selling price of the base currency while the second value is what we call the ‘question’ or the buying price of the base currency. In the example, one Euro can be sold for 1.4210 USD or buy the one Euro for 1.4200. Profit can be made through the difference between the ‘bid’ and ‘question’ values that we call the ‘spread’.

FOREX trading can happen every second. FOREX trade is so quick-paced that there is no specific time for trading. It happens all the time with the deal of buying and selling closed within seconds. But, it can be also a matter of timing for one to make profit in FOREX trading. The value of currencies increases and decreases over a period of time. Let’s say that a trader has bought one EUR for 1.4 USD at the beginning of a year and after six months the value of EUR rises to 1.6 USD. That means that 1,000 EUR bought for 1,400 USD can be sold later at 1,600 USD. That gains the trader a profit of 200 USD.

One might reckon that 200 USD is only a small amount compared to what beginners reckon their profit should be. In trading, it is on the safe side to risk a small amount of money and keep goals small term. But it is still best to learn the ropes, strategize and then make higher risks for larger profits.

For strategy, choose the two strongest currencies that you can handle and focus on those two currencies at first before handling other currencies. Research on the strengths and weaknesses of each currency. It is also recommended that you choose a currency that is more familiar so that it’s simple to keep up with the trend and possibly predict the increase or decrease of values. Local and global events trigger movements in the FOREX trade. Be updated, be flexible but keep on track and strategize. Finally, choose a broker wisely. Look for a legitimate and reliable broker that will offer the best options for more profit.