subject: Currency Trading Techniques: Tips To Succeed In Your Forex Business
[print this page] Many people today are trying to learn the ins and outs of currency trading techniques because they're interested in making some easy money in the markets. Maybe they've seen one of the many infomercials on television talking about how easy it is to become successful trading FOREX (foreign exchange). Lured in by the appeal of huge leverage and pie in the sky hopes of making a killing, many new investors approach the market in a purely speculative manner. This can present problems.
Many new traders treat the currency market like a roulette wheel in a Nevada casino, putting their money down on either red or black, knowing they have almost a 50/50 chance of coming out a winner. And it's true that putting on a trade in FOREX carries a 50/50 chance of winning or losing. The currency you're betting on is going to go either up or down and you're going to come away either a winner or a loser. But it's not quite as simple as it sounds.
You've probably heard the old saying, "Buy low, sell high." In currencies, you can also sell high and buy low, which seems to be the reverse but really isn't. Currencies are always traded in pairs, one currency against another. Most of the more popular trades include the US dollar as one of the currencies in the pair. To be successful you have to correctly determine which member of the pair you're trading will go up and which will go down.
Good currency trading techniques will help you to decide not only which member of your selected pair is trending up or down, but also the best time to enter and then exit a trade. For example, one of the most popular trades in the FOREX is the Euro Dollar/US Dollar pair. Since the Euro is the first named in this coupling it's called the base currency. A price quote on this pair (also called the exchange rate) tells you their value relative to each other. These values change constantly.
Let's say the current quote for the Euro/USD (US Dollar) is 1.33. This means that one Euro dollar is valued at $1.33 (US). If you think the Euro is going to go higher than 1.33, you would BUY this pair (also called going LONG). If you think the Euro is going to go lower, you would SELL the pair (also called going SHORT).
The next step is to wait for some movement in the currencies and then exit the trade. If you guessed correctly, you will profit to the extent that your predicted currency moved from the point the trade was entered. If you guessed incorrectly, you will lose the same amount.
Useful currency trading techniques will tell you the best time to exit your trades. This will include not only how much profit is enough (on the plus side) but also how much of a loss you're willing to absorb. To make a long-term profit, you simply need to guess correctly more than incorrectly.
