Friday, 2 October 2009

What Every Newbie Needs To Know About Forex TradingOver the years, forex trading has rapidly become one of the hottest topics around town as a way for

What Every Newbie Needs To Know About Forex TradingOver the years, forex trading has rapidly become one of the hottest topics around town as a way for


Over the years, forex trading has rapidly become one of the hottest topics around town as a way for people to invest their money and get rich. But how does a beginner know if forex trading is right for them and that it will be a safe investment? Here are some crucial elements of forex trading that anyone interested should know about even before attempting it.
Forex, also known as “FX” for some, is short for foreign exchange. Forex trading doesn’t get in the big press like stocks, options or commodities trading. However, it is the biggest market in the world and it presents investors with an amazing opportunity for profit.
Simply put, forex trading is just the selling and buying of currencies between different nations. Unlike commodities or stocks trading, money is not used to purchase a certain commodity or stock. You either lose or make money depending on the exchange rate between a pair of currencies in forex trading.
Unlike other forms of trading, forex trading is not investing in any single company or even a group of companies. Forex trading is the investment in the economy of a nation. What you are doing in forex trading is laying a bet that the overall economic wellbeing of the first nation will improve in relation to that of a second nation.
Let us use an example where you are trading between the US Dollar and the Japanese Yen. Your analysis of the situation appears to indicate an increase in the value of the US Dollar and therefore a rise in its price while the Japanese Yen will drop in value. You then decide to execute a trade to buy US Dollars and sell Japanese Yen. If your analysis is accurate and your predictions come true, then the US dollar will rise in value while the Japanese Yen drops and you will make a profit!
Now, you may be asking: “Is forex trading really that simple?” In actual fact, it is not as simple as that. The prices of different currencies are amazingly difficult to forecast because there are a lot of factors that can contribute to a change in exchange rates. One of the most important aspects to remember in forex trading is that you always trade in pairs of currencies. You will always buy one currency and sell another, so in order to make an accurate decision, you can not just look at one nation’s economy; you need to look at both.
Of course, there is no need to restrict yourself to trading only one pair of currencies in forex trading. The forex market offers dozens of currencies to choose from, but if you are just beginning in forex trading has only started out, it is highly recommended that you trade the seven major currencies first:

USD - US Dollar

GBP - British Pound

EUR - the Euro

CHF - Swiss Franc

JPY - Japanese Yen

CAD - Canadian Dollar

AUD - Australian Dollar

It is highly advisable for small investors to concentrate their forex trading on just these seven major currencies. Gain a good understanding and knowledge of the economy of these nations and their currency movements and you are well on your way to forex trading success

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