So you think you would like to participate in foreign currency trading? More and more people are investing in the market by themselves and forex trading is becoming more popular by the day. Listed below are a few facts that you should be familiar with. In this article I will be using fx trading and foreign currencies interchangeably since they are basically the same thing.
1) There is less regulation in dealing with foreign currencies. Foreign exchange trading does not have the same strict country regulations as other types of markets.
2) There are no fees in when dealing with foreign currencies. In fact, it is the only market containing no exchange fees or commissions.
3) This market is run all over the world and therefore is not centralized. Because there is no way to corner the market, fraud options rarely exist in forex markets.
4) The forex investor will also find that this type of trading is very convenient. You have the ability to trade 24-hours a day from the comfort of your own home.
5) The currency exchange also offers high liquidity. What this means is that you can invest a very small amount of large amount of money depending on what you are comfortable with.
6) Through trading foreign currencies you can also increase your earnings by up to 100 times more than with regular trading. You do this with margin and leveraged investments that will give you larger profits.
When learning to trade foreign currencies, there are quite a few terms that you will also need to know and understand. These terms will be explained throughout this article. First of all, you must know what a “pip” is. A “pip” refers to the least amount a cross price quote can alter on the forex exchange. Another term, called the “spread” refers to the price difference between the selling and buying price of a particular currency.
There are also different trading trend types when reading foreign currency charts. There are two that I would like to address in today’s article.
1) Uptrend – This occurs when the currency trading price is on an upward rise. In order to successfully detect an uptrend, forex traders, typically use hourly and daily charts. The forex trading strategy required to take advantage of an uptrend includes the ability to detect the best time to place an entry order. This happens after the trend was previously in a long downtrend.
2) Downtrend – It is important to understand this pattern. The novice investor may not understand that there are often small rises in foreign currencies during a downtrend pattern. This can confuse some investors who are looking for definite signs of a trend pattern change not realizing that there are often small rises during a downtrend that may take place.
Understanding the different trend patterns and chart types is crucial to successfully trading currency. When leaning to trade foreign currencies it is important to study all methods available and to select the one that makes the most sense to you. There are line charts, bar charts, and candlestick charts for an investor to use when trading forex. Research each of them before you begin trading foreign currencies.