The (Foreign Exchange) Forex Trading Market Explained.
 

Money Management Basics for Forex Traders

Money management in the foreign exchange currency market requires educating yourself in a variety of financial areas.  First, a definition of the foreign exchange currency or forex market is called for.  The forex market is simply the exchange of the currency of one country for the currency of another.  The relative values of various currencies in the world change on a regular basis.  Factors such as the stability of the economy of a country, the gross national product, the gross domestic product, inflation, interest rates, and such obvious factors as domestic security and foreign relations come into play.  For instance, if a country has an unstable government, is expecting a military takeover, or is about to become involved in a war, then the country’s currency may go down in relative value compared to the currency of other countries.

There are five major forex exchange markets in the world, New York, London, Frankfurt, Paris, Tokyo and Zurich.  Forex trading occurs around the clock in various markets,   Asian, European, and American. With different time zones, when Asian trading stops, European trading opens, and conversely when European trading stops, American trading opens, and when American trading stops, then it is time for Asian trading to begin again. 

Most of the trading in the world occurs in the forex markets; smaller markets for trade in individual countries.  Simply put forex trading is the simultaneous buying of one currency and selling of another.  Over $1.4 trillion dollars, US of forex trading occurs daily and sometimes fortunes are made or lost in this market.  The billionaire George Soros has made most of his money in forex trading.  Successfully managing your money in forex trading requires an understanding of the bid/ask spread.

Simply put the bid ask spread is the difference between the price at which something is offered for sale and the price that it is actually purchased for.  For instance, if the ask price is 100 dollars, and the bid is 102 dollars then the difference is two dollars, the spread.  Many forex traders trade on margin.  Trading on margin is buying and selling assets that are worth more than the money in your account.  Since currency exchange rates on any given day are usually less than two percent, forex trading is done with a small margin.  To use an example, with a one percent margin a trader can trade up to $250,000 even if he only has $5,000 in his account.  This means the trade has leverage of 50 to one.  This amount of leverage allows a trader to make good profits very quickly.  Of course, with the chance of high profits also comes high risk. 

People who do forex trading do so because they are attracted by 24 hour trading days, by strong liquidity – unlike stocks, buying and selling is almost instantaneous – and the fact that forex trading usually occurs without paying commissions.

Like many other speculative investments, a key part of money management for the forex trader is only using money that can be put at risk.  It is wise to set aside a portion of your net worth and make that the only money you use in forex trading.  While the chances of good profits are there, if you should have a problem and get wiped out, you’ll only have a limited amount of money placed at risk.   Also remember that the market is n constant motion.  There are always trading opportunities.  If a currency is becoming stronger or weaker in relation to other currencies there is always a chance for profit.  For instance, if you believe that the Euro is gong to become weak compared to the US dollar then selling Euros is a good bet.  If you believe that the dollar is going to become weaker than the yen, or the pound sterling, then selling dollars is wise.  Staying current on the news and current events in the countries whose currency you hold is a smart move.  Many people reach points where they can predict currency changes based on political or economic news in a given country.  Remember though that forex trading is speculation, so be careful when managing your funds and only invest what you can afford to risk.

 

 

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Introduction to Online Forex Trading
Current Forex Currency Rates
Forex Trading
How to Get Started In FOREX Trading
FOREX versus Futures Market
FOREX versus Stocks
FOREX Trading Philosophy
FOREX Tools
Fundamental Analysis In Forex Trading
Forex Technical Analysis - Part 1
Forex Technical Analysis - Part 2
FOREX Trading Strategies
Trading Currencies on Margin
Currency Option Marketplace
FOREX Signals
How to Read FOREX Quotes
Calculating FOREX Profits and Losses
Risks of FOREX Trading
FOREX Training
FOREX Trading Software
FOREX Brokers
FOREX Glossary
Forex Updates and Training
Crash Course in Forex Education
How to Recognize Patterns in Forex Trading Markets
Defining Exotic Currencies and Their Impact on Forex Markets
Defining Trading Trend and Ranges in Forex Trading
Mind Games – The Psychology of Forex Market Trading
Crossing Currency - What’s This Mean to Forex Traders
Money Management Basics for Forex Traders
Choosing Your Forex Broker
Expensive Beginner Forex Trader Mistakes
The Elliott Wave Theory for Forex Markets
Failsafe Facts to Guarantee Failure in Forex Trading
Five No Nonsense Strategies in Forex Trading
Global Expansion and It’s Reaches within the Forex Market
Hedging in the Forex Market
The Important Ways to Keep From Losing in the Forex Markets
An Overview of the Euro’s Performance in the Forex Markets
Six Trading Tips for the Forex Newbie
The Lowdown on Day Trading
Interpreting How Interest Rates Drive the Foreign Exchange Markets
The Basics of the Bollinger Band Technical Indicator in Forex Markets
Relative Strength Analysis in Forex Trading
The Basics on Understanding Forex Options
Forex Charts – What Are They and How Do You Read Them
Interpreting the Future of the Oil Marketplace and How It Affects Forex Trading
Top Five Economic Indicators that Drive Forex Trading
Rules for Trading in Forex Markets
How Does the Japanese Yen Stack Up Against the US Dollar in Forex Markets
Pivot Points in Forex
The Ins and Outs of Trying Out a Forex Demo Account
The Top Currencies to Watch in the Forex Trading Game
Defining Moments Regarding Trading Trends and Ranges with Forex
Top Ten Basic Terms in Forex Trading and Their Definitions
Forex Folklore Investment Myths in the Market
Five Economic Driving Forces that Influence Forex Trading
Day Trading All You Wish You Did Not Have to Know
Time line for Daily Forex Trading When are the Optimum Moments
Forex Relative Strength Analysis
How Forex Quotes Can Influence your Trading Tactics
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