Forex For Beginners Making Money From Currency Trading

Forex For Beginners Making Money From Currency Trading

FOREX stands for Foreign Exchange and it​ stems from the​ international financial market. That is,​ the​ Forex market,​ the​ place where currencies of​ different countries are bought and sold in​ a​ similar manner to​ the​ buying and selling of​ share market in​ the​ ASX,​ Australian Stock Exchange.

Forex market started in​ the​ 1970’s and that is​ when floating of​ currencies and free exchange rates began. Like share prices,​ it​ is​ the​ people who traded in​ the​ Forex market that affects the​ prices of​ the​ currencies traded in​ accordance to​ the​ law of​ supply and demand. Hence,​ if​ the​ market force dictates,​ e.g. if​ the​ US Federal Reserve decides to​ raise interest rates to​ curb inflation while Australia Reserve Bank have the​ interest rate on​ hold,​ that should stimulate a​ change in​ exchange rate. One should therefore see interest rate effect with the​ US $ worth more in​ value than AUD when this happens.

The amount of​ money traded daily in​ the​ Forex market is​ uniquely enormous. the​ rate of​ exchange makes Forex the​ single most liquid financial market with currency traded amounting from 1 to​ 1.5 trillion US dollars per day. Owing to​ this enormity,​ it​ is​ not possible for the​ Forex market to​ be manipulated externally. Hence,​ no single trader or​ even any financial institution trading in​ it​ has the​ wealth to​ influence the​ price of​ any currency in​ its favour.

The Forex is​ so fluid and so much exchange at​ such a​ fast pace that it​ is​ just impossible for anyone to​ affect the​ market of​ any one major currency. the​ sheer liquidity of​ the​ Forex market with so many exchange taking place,​ enable the​ traders to​ open and close position within seconds. This is​ because there are always willing buyers and sellers available at​ any one time since the​ collective exchange of​ the​ various world Forex centers is​ considered open for 24 hours as​ it​ spans across different time zone.

Forex is​ naturally unique compared to​ the​ stock market which is​ normally associated with long term investments. in​ currency trade,​ a​ minute change in​ prices of​ a​ currency generate situation that permits investors to​ apply all sorts of​ strategies to​ their advantage. However,​ there are also long term hedge investors involved in​ Forex and also short term investors that make use of​ credit lines to​ seek large gains over a​ short period.


Unlike NYSE (New York Stock Exchange) or​ ASX (Australian Stock Exchange),​ there is​ no central marketplace for Forex. Instead the​ exchange takes place over the​ counter 5 days a​ week on​ a​ 24 hour basis,​ via satellite,​ among major financial centers in​ London,​ Paris,​ Tokyo,​ New York,​ Sydney,​ Hong Kong,​ Frankfurt,​ Singapore and Zurich. Dealers,​ including online ones,​ around the​ globe are always available to​ quote any major currency.


Marginal trading is​ like using a​ credit card and it​ is​ like borrowing money to​ trade currency. This encourages investors to​ take additional risk by opening a​ bigger trading position with less out-of-the pocket money and relying more on​ borrowed capital that is​ provided by the​ brokering company.

Marginal trading in​ the​ Forex market is​ traded in​ lots of​ which 1 lot is​ about 100,​000 of​ unit currency. the​ margin requires to​ hold that $100,​000 position is​ 1.0% of​ $100,​000 and that is​ equivalent to​ a​ personal capital outlay of​ $1000 (i.e. taken from 100,​000 x 0.01) while the​ balance of​ $99,​000 is​ covered by the​ broker.

If the​ currency traded increases in​ value you make the​ difference when you close your trading position. You capital outlay and profit gained minus any transaction cost from the​ trade are credited into your margin account.


Of course,​ one cannot just trade without any knowledge of​ the​ currency market. to​ be successful in​ Forex trading one has to​ be analytical and this is​ what all experts do. They do what we​ call Technical and Fundamental Analysis.

Technical analysis is​ associated with studying data gathered on​ all the​ fluctuations of​ the​ various currency prices over time. From the​ data,​ chart patterns are formed and movement of​ the​ currency prices can be observed for trading decisions to​ be made.

The behaviour patterns of​ each currency prices are the​ reflection of​ all factors in​ the​ market place such as​ an​ event,​ overbought and oversold situation,​ interest rates,​ etc. Most of​ these patterns in​ chart forms are instantly provided by the​ brokerage firm you trade from.

Fundamental analysis is​ an​ event based analysis like political situation,​ rumours,​ economy,​ interest rate setting by central or​ reserve bank of​ the​ country concern,​ news on​ tax policy,​ GDP,​ country’s economic performance,​ political unrest,​ natural disaster,​ employment or​ unemployment figure announcement,​ etc. Value of​ a​ currency can also be influenced by expectation,​ anticipations and perceptions of​ the​ participants in​ Forex trading,​ i.e. it​ could be driven by sentiment of​ these Forex participants.


To profit out of​ Forext tading one need sheer diligence and trading experience and getting familiar with Technical and Fundamental analysis to​ place once trade. Anyone who participates in​ it​ should have equal opportunity since it​ is​ one market that is​ so liquid and rapid moving that it​ is​ impossible to​ be influenced by anyone person or​ fund management.

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