So I guess you too want to learn how to trade Forex, in order to make a living out of it, and therefore promise you that you have come to the right place.You do not have to be a regular trader to take advantage of the lucrative Forex market. Any time you travel and exchange money you take part in the foreign exchange market(Forex market).In fact Forex trading is the giant of finance, dwarfing all the other capital markets in the industry.
Despite its overwhelming market size, the concepts of trading currencies are fairly simple. Here are some basics that you need to understand.Go through them as you “learn Forex Trading Online,learn How to trade Forex”
The forex market is not like the stock market where you will find millions of stocks to choose from. In the forex market you only need to be keen on the 8 major economies and then analyze which one is likely to provide the best overvalued or undervalued opportunities. Here are the 8 main countries that play a big role in the currency market and you should keep a keen eye on them as you “learn Forex Trading Online,learn How to trade Forex”
- United States
- Euro-zone (the ones to watch are France, Italy,German and Spain)
- United Kingdom
These 8 economies have the most sophisticated and largest financial markets in the whole world. By concentrating on the 8 countries, you can take advantage of earning any interest on the most liquid and credit worthy instruments in the financial market. Economic data is usually released from these 8 countries on a daily basis allowing you to stay informed and on top of your game when it come to analyzing the health of each economy.
Other important aspects that will help you “learn Forex Trading Online,learn How to trade Forex”
Yield and Return
When it comes to learning how trade Forex for a living, another key issue you should remember is that yield usually drives return. Whenever you are trading in the Forex exchange spot market, keep in mind that you will be selling and buying two different underlying currencies. All the currencies are usually quoted in pairs since each currency is valued in comparison to another. For instance, If the USD/EUR is quoted as 1.3500 which means it takes about $1,35 to buy one euro.
In each transaction you make, you will be simultaneously purchasing one currency and then selling another. This means you will be using the proceeds from the currency that you sold to buy the currency that you are now buying. Additionally, each currency in the world comes with an interest rate attached. It is your obligation to pay the interest rate of the currency you have sold when you earn interest on the one you have bought.
The currency trading market also offers tremendous leverage – usually as high as 100:1 – This means an investor can control assets worth $10000 with as little as $100. Nevertheless keep in mind that leverage is sometimes a double edged sword: It can earn you massive profits when you are right, but it can also generate heavy losses if you are wrong.
Currency value is never stationary, and it is this feature that gave birth to carry trade, one of the most popular Forex trading strategy. In this strategy, a user hopes to earn not only the interest, but also looks for their potential to appreciate in value.
Getting to Know Interest Rates
Another important aspect of this trade that you should keep in mind as you “learn Forex Trading Online,learn How to trade Forex” is knowing where the interests are headed.This requires some understanding of the country’s underlying economics. Countries that are doing well with solid growth rates to curb inflation are likely to raise rates to curb growth and inflation. On the contrary, countries that are having difficult economic times ranging from a full recession to a slowdown in demand are likely to reduce interest rates.
The Bottom Line
Forex trading is now accessible by many people than ever before thanks to availability of electronic trading networks. This large financial market offers a number of opportunities for investors who are patient and take their time to understand it as they learn how to minimize the risk of failure.
Thank you for visiting my blog and reading my article, and if you have anything to add or want me to blog about a particular topic, do not hesitate to leave me a comment below.