Learn Forex Trading Basics

The idea of trading Forex is pretty daunting for some. It's an attractive venture to get in to, but if you don't know the ins and outs, you could find yourself taking some unnecessary risks. While the possible benefits or trading Forex can be immense, you have to know what you're doing.

Forex trading is simply put, the direct access trading of foreign currencies. It used to be that only large banks and big traders dealt in foreign exchange trading, but because of the Internet and other technological advances, even an individual can trade Forex now. Small traders can take advantage of the benefits of Forex by using online trading platforms.

The most common currencies to be Forex traded are the US dollar, the Euro, the Canadian dollar, the Swiss franc, the Japanese yen, the British pound and the Australian dollar. These major currencies are on a floating exchange rate and are traded in pairs. The four major pairs that are commonly traded are:

·         US dollar against the Japanese yen

·         Euro against the US dollar

·         US dollar against the Swiss franc

·         British pound against the US dollar

You make your Forex trades based on your predictions that one currency will appreciate against another currency. Dealers at brokerage companies and at major banks perform transactions and trading goes on 24 hours a day.

Forex price movements are usually quite smooth and the daily turnover in currency is usually near $1 trillion. This makes is very easy for a new investor to enter the market or to leave it easily without causing any upset for other traders.

Forex, FX for short, is the oldest financial market in the world and also the largest and most liquid. Forex trading is not centered on an exchange like global stock markets. Because of advanced technology, Forex brokers can break large sized inter-bank trading units into smaller pieces and offer them to small business traders and even individuals.

Learning to trade Forex is not difficult, but you can't just step into the market blindly. You can open a Forex account for sometimes very little money, and once that's done you can start trading. But before you do, take time to learn everything you can about Forex trading and finding a good broker if you decide to use one. These will be the factors that make or break your Forex trading success.

There are no magic formulas, but there are tips and tricks that you should know. Your first step will be to find a good resource that teaches you the details of Forex trading, including the risks of trading and how to avoid them. Learning to trade the right way will save you money and headaches and bring you fantastic results in the way of profits from Forex trading.

Can Anyone Learn to Trade Forex?

If you can read with some level of skill, you can do anything - even learn how to trade Forex - and you don't have to be an expert to do it, but you do need to know that like any market, you have to watch out for pitfalls. But once you know what the pitfalls are, you can get involved with Forex trading with relative peace of mind.

Let's start with the basics. The word Forex commonly refers to Foreign Exchange Currency, which means you're buying one particular currency while at the same time selling another.

Learning about Forex Trading and how it works isn't difficult and you can learn what you need to know online. How quickly you learn depends on how fast you can absorb the material you need to know.  But once you do know how to handle Forex, you're on your way.

Understand that each market has its own buzzwords and important facts to know and Forex isn't any different. To start with, you should understand that there are six major currencies (these are the currencies most commonly used) when dealing with Forex.

Those currencies are the United States dollar (USD), the Japanese yen (JPY), the Euro (EUR), the British pound (GBP), the Swiss franc (CHF) and the Australian dollar (AUD). There are also minor currencies but more than likely, you'll be dealing with the currencies used most often.

A very important buzzword in the field of Forex is the term Pips. You need to learn all you can possibly learn about Pips. Pips are units (much like a quarter is a unit of money) and the name refers to the price interest point. However, these are also sometimes called percentages in point.

In Forex trading, a Pip is used to figure what profit you earned on the currency or what amount of money you lost. With Forex, you trade the most commonly used currencies as a pair.

For example: you could trade the United States dollar with the Japanese yen and it would be written like this: USD/JPY. What this means is you buy one currency for a set amount and you believe you can sell it for more. This is called long position. The opposite is the remaining currency - the short. You would sell a currency if you thought it was going down in value.

Every currency pair has an exchange rate and that's where a Pip comes into play. Pip is the fourth decimal place in the quote. If you've decided you want to learn about Forex, you can learn on your own and you can also take advantage of step-by-step tutorials such as are offered online.

What to Look for in a Good Forex Course

If you've decided it's time to get involved with Forex trading but are looking to broaden your knowledge by taking a Forex course, there are a few things you should consider. Before reviewing and making your final choice, see if you can get a course overview.

Check the course website to see if they offer one and if they don't, contact the course administrator and ask for one. You want a Forex course that will help you learn what makes the currency market fluctuate and when to use the fluctuations to your advantage to buy or sell. The course you decide upon in the end should teach you how to read currency charts to maximize the greatest potential profit for you.

The course you choose should teach you all the basics-the currencies, how the currency pairs work as long and short. The best type course will make sure you fully comprehend the value structure and importance of pips.

If the Forex course is a good one, it will also offer you instruction on the timing know how to place a bid. The course should teach you about the market trends-possible causes and repercussions to the Forex. The course should help you be able to define margins and channels and feel comfortable with the terms.

The Forex course should teach you a solid foundation on how the economic and political landscape can affect the Forex. When seeking a good Forex course to teach you the ins and outs, make sure they cover stop-loss and that you understand how to effectively use a stop-loss.

The course should cover how to recognize and watch for false signals and the course teach you how to put into practice a step-by-step plan to avoid making a move based on false signal.

Look for courses that offer video tutorials, webinars and the ability to safely try you hand at Forex trading with a virtual account. A good, reputable Forex course will give you a more than basic knowledge of how to use charting to learn how the Forex behaved in times past. By the same token, a good Forex course will also give you the knowledge of the risks involved with Forex trading and won't promise you wealth without risk.

When it comes to Forex trading, even once you've completed a course, never stop learning about it. Stay current on what's going on so you'll be able to make the most informed decisions.

What Is the Best Forex Trading Strategy?

As with any kind of market trading, the first thing you should do is make sure you know your bottom line-where your stop signs are. Have a limit set firmly in place and as the saying goes, 'know when to fold 'em.' When you've hit your goal profit or loss limit, walk away.

Forex trading, because of the high probability to earn a great amount of profit in a short amount of time, can be addicting to anyone, so put up safeguards to keep yourself from falling into a 'can't stop no matter what' category.

Make sure you have money you're capable of risking in case something goes wrong. Am I saying you'll lose money if you engage in Forex trading? Not at all and the odds are actually more in favor of you making a profit as long as you know what you're doing. Just make sure the money you're using isn't money you have to have to live on.

If you're still a relative beginner, the first move you should make is to read Forex tutorials that show you the ropes from day one. When setting in place a Forex trading strategy, you want to pay attention to something called channels.

Remembering learning about charts and graphs in high school and thinking they would be useless information? Well they're not. Here's where they come in handy. On a graph, channels are lines that go up and down and can help you learn and gauge what's been going on with the currency.

In other words, what's the range? The graph looks like squiggly mountain peaks (which represent when the currency is up) and valleys (which represent when the currency is down). Like playing connect the dots, you draw lines from mountain peak to mountain peak. You can see at a glance how the currency fared.

If you're brand new to Forex trading and you understand all of the buzzwords, but you're not completely sure how it works, consider searching for a Forex site that will allow you to take a free demo in Forex trading. You can take your time and learn how it's done, without having to worry about any monetary risk to you.

You can also talk to others who understand the ins and outs of Forex trading. There are forums, web seminars and groups that will take you under their wing and teach you the ropes.