Forex Trading Basics

forex trading basics

forex trading basics

What is forex?

The term forex is derived from the following words- Foreign and Exchange. Forex clearly shows how the foreign currencies are or rather it processes where you make money through the tactic of exchanging one currency with another. It has its market which is known as forex market. This place is where you will trade your currencies to acquire profit. It is exactly like other market where item prices are bargained.

One thing you need to know while learning forex trading basics is that in this market you only trade currencies. For example, in forex market you may buy EUR by paying in USD dollars or you may obtain Gold by paying in Australian Dollars (AUD). Forex business is usually done 5 days in a week. That is it starts on a Monday morning till Friday evening. Forex trading operates all the 24 hrs in a day. The ideal currencies are known as free-floating currencies. These are currencies are not associated with commodities like silver or gold.
Types of forex trades
Before venturing into this market you need to have learnt forex trading basics ,for example, the types of forex trades. The first type of forex trade we are going to discuss is known as SPOT trades. This is where money is traded on the spot. For example, you can deposit your money in your bank account. Then the bank immediately converts the money from euro to the currency you want to withdraw. They usually charge a little surcharge.

The second way you can opt to is Options. This basically means you have to know details of a certain currency relationship. You have to be sure of the trade and the date that the currency will gain momentum, thus you will obtain profit. While learning the forex trading basics you noticed it is known as to project. For, example, you may project that on certain date euro will be worth twice the value of 1 pound. On that day if your projection was correct ,you will put your trade on and you will gain the profit as you had agreed to trade.

Some great forex trading basics you need to learn
* You need to understand clearly that your profits or loses are totally determined by total buys (up) or sells (down) of currencies.

* You need to have a trading plan so that you may avoid pitfalls that can make you lose money thus discouraging you to trade forex.

* You need to come up with an effective simple method to use so that you can make some cash.
* You should learn some forex trading basics of your system. You should not try the short or intra day trading; these systems do not work. To make money you need to invest in long term currency trades.

* You need to work smart not hard. The amounts of hours you spend on trading platforms do not determine the profit you will get after a trade.

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