Copyright 2006 Sam BeatsonThe Forex or foreign exchange is also known as FX, and can
be traded upon by anyone from home who has an internet
connection and some knowledge.
The great thing about being a beginner to forex trading is
you can trade using "monopoly" money if you want to.
Most people have the belief that trading currency is
extremely risky and a gamble. However there are many ways
to technically analyse the market and identify the pattern
of the movement to the point we can instigate "good" trades
on a consistent basis.
So, how would you like a change of direction. For example,
imagine if in two weeks from now you were confident enough
and skilled enough to place trades on a daily basis which
give you a consistent yield of $200-500 per day.
It's very possible with the correct training. There is a
high risk involved though, it's true. If you don't have as
much covered as possible with regard to the basis of your
decision to trade. If your psychology is not right, you
won't stand a chance.
The forex never sleeps. 24 hours per day from sunrise in
Australia through to sundown in New York, banks and retail
investors trade. Banks in the multimillions.
It must be said, take your time to learn about the forex
and what you should do before diving in with a LIVE account
and blasting away capital like your on drugs. You can do
it. But do it right.
Currency is traded in pairs. That means, as you buy one
currency you automatically sell the other currency in the
pair. Examples of pairs are the EUR/USD or the Euro against
the US dollar, GBP/USD or 'cable' or 'pound dollar' because
there used to be a cable relaying info under the ocean from
Europe to US. Another example is the USD/CHF or the dollar
against the swiss franc - 'dollar-swiss' or even 'swissy'.
The left hand currency is known as the base currency and
the quoted price is always how much of the right hand
currency can be exchanged for 1 unit of the base currency
or vice versa.
So for example a quote of 1.6452 on the GBP/USD means for
every 1 pound you sell you get 1.6452 US dollars. Similarly
if you were to buy the pound, the rate is 1.6452USD to the
pound.
Currency is traded in lots, multiples of lots or for the
retail investor sometimes, in fractions of lots. One lot is
equal to 100,000 units of the base currency in a pair.
In the above example, buying 1 lot on the GBP/USD means you
are buying 100,000pounds and automatically selling
164,520USD.
Profits are made on the forex market much like in any
business, but with a twist. You can aim to buy and then
sell at a higher price. For example you buy your 100,000GBP
automatically selling 164,520USD at the rate 1.6452 and the
price quoted rises to 1.6587.
You then close your position on the market which means you
are doing the reverse really. You have made a profit of 35
pips or points because the price has moved up 35 pips or
points [the last 2 decimal places]. The 'big figure' is the
2 numbers after the decimal point generally.
Buying and selling at a higher price can be likened to
traditional business in that you buy wholesale or cheaper
and sell for a profit. Being in a position that you want or
predict will rise is called long position.
The twist in forex is short-selling or being able to sell
and then buy back at a cheaper price for profit. The
reverse scenario applies. You sell when your training tells
you the price is going to fall. You can then close after a
price lowering of however-many pips.
The above looks like big-numbers, however with a leveraged
account, you can trade with a 100:1 leverage, meaning you
only need a margin deposit 1/100th the size of the amount
of currency you want to control, ie $1-2000 will give you
enough leverage to control 100,000 dollars of currency.
This makes profits high, also potential losses. For a 100:1
account trading GBP/USD or EUR/USD, each pip movement is
worth $10. Therefore, in the above example fo a long
position, you would have earned $350 for your one trade. It
might have taken a few minutes, it might have taken a few
hours.
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Sam Beatson loves living with his 2 girls and wife in
Sheffield, UK. He owns http://www.fasttrackforex.com/fx and
encourages you to take advantage of how cheap his courses
are currently going for before he comes to his
senses...Visit http://www.fasttrackforex.com/fx for details.
