A Beginners Look At Currency Trading For Dummies

FinanceStocks, Bond & Forex

  • Author Andy Guides Jr
  • Published September 2, 2010
  • Word count 602

When you decide to get involved in Currency Trading, also known as Forex, you are going to find that one small article on currency trading for dummies will fall far short of giving you all of the information you need. There are many pieces to look at if you are going to start trading in the Foreign Exchange market. You will need to learn terminology, strategies, methods, and techniques that will help you to make successful trades. This is one of the biggest markets in the world and currency is traded seven days a week, on a 24 hour basis.

Forex traders are betting on the way that exchange rates will move. This sounds easy, but exchange rates for countries are affected by multiple variables. The Forex trading arena is an even playing field, information is received by all traders at the same time. While everyone speculates on changes in the currency market, no one can know for sure when a market is going to rise or fall.

There are many environmental impacts that affect the currency exchange rates for countries. Wars, arms, changes in the economy of a country, death of leaders, etc. Just about anything that affects the people in a country affect the value of the currency in that country.

Traders try to predict fluctuations in the exchange rate and bet on the pairs that will give them the largest gains on their bet. When one country's currency is being traded against another country's currency, it is call a "pair". All of the major pairs that are traded involve the US dollar. When a currency pair is being traded that does not involve the US, it is called a "cross currency pair." An example of a cross currency pair would be EUR/JPY (Euro/Japanese Yen). The most actively traded cross currency pairs are the EUR, JPY, and the GBP (sterling pound or British currency).

There are a couple of important things to know about how the pairs are shown. First, the stronger currency is traditionally listed on the left. So, when you see EUR/USD, you know that the Euro is stronger than the US dollar. This stronger currency, the one on the left, is called the "base currency." The base currency is what you buy or sell. So, if you buy 10000 EUR you are automatically selling 10000 USD.

On paper it would look like this, 10000 EUR/USD. The currency on the right is called the "counter currency" or "secondary currency." The value of this currency when you buy or sell your base currency will determine what your profit or loss is on your trade.

Reading this does not convey the speed with which trades are happening. Trading is taking place throughout every day and night every day of the year. The market can fluctuate by the minute with many of the currency pairs. There are pairs that provide less risk and extremely high risk pairs. You will want to know which pairs fit in with the level of risk you are willing to take.

As we said earlier, there is a lot to learn to be able to start trading successfully. There are numerous classes available on Forex trading and many blogs by successful traders that you will find helpful. When looking at tools to make trading more consistent, you will want to look at the historical gains and losses of the method you are looking at. Following a system or method to see how it actually acts when applied to the current market will also help you to select the system that will be most helpful for you.

If you need to get some extra cash from home you may want to get a currency trading for dummies guide, so that you can begin to do some currency trading on the side.

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