Forex Currency Trading on Economic World News
“Buy low, sell high” is not just strategy for trading stocks but works equally as well when you’re investing in Forex. When you’re trading stocks you study a company’s prospectus, try to map the market trends and study the volatility and volume. Trading in Forex requires an extensive knowledge of world affairs including political nuances and foreign policy as well as general stock market knowledge.
For instance, everyone knows that Iraq is operating under sanctions from various countries and its trade is limited. The dinar isn’t worth much at this time and some people would call you a fool if you decided to invest in it. The financial outlook for the dinar doesn’t look very bright right now even though Iraq is rich in natural resources. A dinar is worth less than one American penny at present; you could secure quite a bit of Iraqi currency with very few dollars. But would it be worth it and would you get a return on your investment?
This is where strategy and your knowledge of world affairs comes in. On the surface the casual investor would think that investing in the dinar would be nothing more than finding a place to park your cash. But the investor that keeps up with current events and stays up to date with political projections might see it differently.
In order to successfully invest in Forex, one needs to have some degree of imagination and be able to project the result of current foreign policy along with the personalities of world leaders. The Iraqi dinar, for example, would be a worthwhile investment once Iraq was relieved of all the trade embargos and other restrictions that have been placed on the country. The recent moratorium on drilling in the Gulf of Mexico plus the ever increasing sympathy of the United States government with the culture of the Middle East points to sanctions being relaxed or removed in regards to Iraq. Thus, the dinar would skyrocket in value and any dollars invested in it would produce a handsome return.
As you can see, a little imagination combined with studying current political trends is essential in deciding what to buy when you’re investing in Forex. You won’t always be right when you draw conclusions about the results of political trends and foreign policy. However, anyone with a basic knowledge of how the world economy works can be reasonably certain that the motive of profit will prevail no matter what world leaders claim their policies are.
When you are trying to decide whether to invest in a particular currency you need to look into all future scenarios and map out all the ways that the world economy-and particularly major government players-would profit if that currency rose or fell. Assess the political climate and attitudes of all the countries involved, who could profit from that currency’s movement and what their motivations are. Once you pin down a probably future scenario you can decide whether or not that particular Forex investment would be a good one to add to your portfolio.
Join us at FXChartTrader.com home of the FX Chart Trader System to discuss this and more. We want to help you be a successful Forex Trader and learn to read the economic news of the world.
Do You Have a Trading Edge?
EURUSD PRICE ACTION
The Art of Forex Trading can be pretty tricky. The market can can change direction or trick you into believing the direction has changed. Your Trading Edge should include the use of different technicals and fundamentals. The development of your Edge should include:
- Market Filters: You will want to see the big picture
- Market Dynamics: Pattern and Price Movement Knowledge
- Time Frame : The Proper Use of Time Frames Necessary to Trade
- Zone Wave Trading: Setting Up the Importance’s of Measured Moves
- Tools: Fibonacci, Bands Waves and Moving Averages Telling the Picture
- Trade Setups: Know the Market Fundamentals with Specific market Setups to Identify Buy & Sell Zone and Targets
Your trading edge will guide your decision to consistent trading profits. The in and out of trading with more wins than losses will lend your edge to a profitable system. You trading edge is something that you as a trader will develop over time and understanding of market condition with a trading system and process that makes sense to you.
Your Trading Edge is the most important aspect of consistent trading. Take the time to develop a trading edge that will guide your decision making activities. You can start to develop a edge by understanding price action , use of filters, market setups and disciplined trading activities.
Forex Trading Basics Explained
Forex trading is an extremely lucrative investment to get into. It is the exchange of foreign currencies world wide sold for a profit depending on what the market does. The market is the people, banking institutions, and international corporations that make up the more then 1.5 to 3 trillion dollars of activity that takes place everyday. But there are still some people who are confused as to exactly what forex trading is and how it works. So in this short article I am going to explain it really simply so that you get the basic concept down.
With forex trading you are trying to buy currencies at an exchange rate for another currency, this is called a currency pair. For example you might exchange the US dollar for the Japanese yen or you may exchange the Canadian dollar for the Mexican peso. You are going to use the American dollar as the unit to determine what the value of the other currencies are, because the less the American dollar is worth the less of any international currency it will buy you. This rule applies to every other currency as well. If the currency would get you less in US dollars then the currency isn’t worth much.
What you are trying to do with forex trading is make what it known as a pip. This is a fluctuation in the right direction for your investment. Decimal format is used to calculate the exact exchange rate for currency internationally. For instance a US dollar might get you 1.5617 euros. You make a profit when the number moves up a point. The more this number moves up the more pips you make. A pip can be a unit of twenty dollars, ten dollars, or less depending on what type of account you are playing with and the size of the lot.
Trading the forex is not like the stock market where they are governed by the SEC. Most of the trading is done over the phone or online. A great portion of the money that is exchanges comes from only five percent of the market banks and large corporations. The other 95% comes from small time investors who may have a few thousand dollars in their account to play with.
Of course there is a lot of technical jargon involved like, Fibonacci retracement, which means the level at which a market trend will break, and fundamental analysis which simply means information you are fed over the news. These kinds of terms intimidate most people, but trust me they are easy to learn and there is no reason why you can pick them all up.
The basic point is to buy one currency at an exchange rate that will rise up enough in value to be able to buy more of a currency which is worth less now because of the increased value all centralized around the US dollar. The 0.0001 example I gave above is spot on for most of the major markets, but for the smaller ones sometimes the price might be measured differently.
I hope this article has been helpful in helping you to understand just how forex trading works.
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