Forex Trading tips And Techniques

Forex trading as the name suggests is dealing with foreign exchange (i.e

. FX or currency exchange). A layman can best understand it as the process of simultaneous buying of one currency and selling of another. Forex trading has a huge impact on the global economy, for it is the most traded market in the world. That is the reason most traders are attracted to Forex trading since they find endless potential in here. FX beginners therefore strive to learn and pick up the best of the skills, tips and tactics to become a successful trader in the long run. Obviously, your dexterity in Forex trading is directly proportional to the profits reaped.

Forex (FX) trading is a true 24-hour market that operates five and a half days a week. So the trading begins Monday morning when the markets in Japan open to trade. This market waits for the trading centers around the globe to come online and Forex trading goes on until the markets in the U.S. close the next day (Japanese Time) by which time Japan has already reopened the trade for the next day so that traders can go on round the clock until the hub in New York closes Saturday morning. For the benefit of FX beginners the article includes various terminologies that explain all the basic terms and concepts of Forex trading to facilitate an easy transition, for beginning with the basics empowers the roots. Few such terminologies are:

Reading Currency Notes

Every currency in the world is given a three letter code. The currencies traders most commonly trade in are: European Euros (EUR), US Dollars (USD), United Kingdom Pounds (GBP), Australian Dollars (AUD), Japanese Yen (JPY), Swiss Francs (CHF) and Canadian Dollars (CAD). For FX beginners foreign exchange prices are indicated by quotes, called currency pairs.As Forex (FX) trading essentially involves the buying of one currency and the selling of another, if you are buying the base currency you are also effectively selling the quote currency and vice versa.

Understanding Spreads

Difference between the ask price and the bid price (the price one buys at and the price one sells at) is quoted in pips. If the quote between EUR/USD at a given moment is 1.2220/2, then the spread is 2 pips. If the quote is 1.22235/50, then the spread is 1.5 pips. It is a fall back mechanism for taking risk from the time it takes on client trade to when the brokers next exposure is hedged. Spreads highly impact ones trading strategy. Wider spreads pose difficulty in generating profit for it means buying higher and selling lower, where as it should be vice-versa. For FX beginners, the key take away here should be to sell high and buy back low.

Risk Management Technique

A significant tool in currency trading is the stop loss order. Stop loss order ensures that a position is automatically liquidated at a decided price in order to limit the potential loss.

Placing an order

For FX beginners, it is extremely crucial to set the exit points. Initiating foreign currency trades, one need to set two trading orders that will be used as exit points, one for selling your currency when you reach a certain profit, and the other to sell in order to cut your losses down.Limit (profit exit) and Stop trading (stop-loss exit) orders should be set correctly; otherwise the trade will not be executed.

These are a few facets of Forex trading every trader; even FX beginners must acquaint them with. We will soon come up with a few other important aspects in our subsequent article. Lying low, and grasping sturdier is the tip to grow into fine Forex trader for FX beginners.

by: Senmon

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