Forex Trading Basics - A Rapid Guide For Beginners

Forex is a widely accepted short form to mean currency trading on the foreign exchange markets

. How to actually trade in various currencies, the forex trading basics are really quite simple. The mysterious and complex part is predicting which currencies are likely to rise or fall in value, and using various mathematical tools to follow and predict trends in currency values.

In its simplest form the trading market works when one person buys a currency using another currency. They wait a time until the new currency is worth more compared to the old one then exchange them back again for a profit. It is possible to do more complex trades, things like betting that a particular currency will move above or below a particular point at a particular time in the future.

Trading on the forex markets is very popular for professionals and amateurs for a number of reasons. One of the most common factors cited by amateurs is the availability of broker accounts which allow a speculator to "Trade on Margin". With this sort of account the amount that can be traded is a multiple of the free balance on the account, for example with a 50 to 1 margin if the account balance was $2,000 then the value of trades that could be made would be $100,000. This allows for greater profits, but can mean the balance of an account is quickly exhausted with bad trades.

There are many ways to chart and predict currency movement trends. However, predicting the future of currency values involves more than just trends. One important consideration is the political situation in the country. For example the market will be affected by such things as impending elections and the results of those elections, political turmoil and wars.

Another important set of factors that must be considered are the economic indicators from the host country. Some of these economic indicators will include things like the balance or trade and the health of the economy. When a country is exporting a greater value of items than it is importing there will be a demand for the currency so that purchasers can pay for their goods. This will lead to the value of the currency increasing. In addition when a country is considered to be economically healthy then the value of currency will increase.

The most difficult set of factors to take account of are those relating to the psychology of the people making the decisions about purchasing currencies. When most of the large speculators decide that a currency will rise they will make trades based on that opinion. A sufficiently large number of people making the same sort of trades will result in that currency rising, it will become a self fulfilling prophecy.

When someone decides that they want to get started in forex trading it is a great idea to do some test trading or dummy trading. Many brokers will give people something called a demonstration account. This allows someone to trade using virtual money - so that they don't risk actual money and can find out if their trading strategy is a good one.

Forex trading basics are accessible to everyone, but in order to make consistent profits it is a good idea to take part in some good quality training and take advantage of a demo account. A thorough understanding of all the factors could be the study of a lifetime.

by: Sam Jax

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