What is Forex Trading?

April 27, 2017

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What is forex tradingMany years ago I stumbled upon trading using technical analysis. It was when computers were just becoming mainstream about 25 years ago. I bought a copy of Metastock and took a few courses on how to read charts and how to interpret indicators and trendlines. In those days, chart data feeds were slow and expensive and computers were prone to crashing at regular intervals.

Twenty five years on, I would like to say that I am living in the Bahamas and have made billions from astute financial decisions. This is not the case however, but I still haven’t given up! Some would say that playing the markets is an addiction and I would agree with them.

These days I prefer to stick with forex markets, or currency markets to the uninitiated. Forex markets trade 24/7 except for Sundays and bank holidays, so they can be traded in the evenings as well as during the day, which is handy if you work.

You don’t need a lot of money to trade forex and to be honest I never have more than a couple of hundred UK pounds in my account at any one time. It’s like playing the most addictive game you’ve ever played. You can trade dummy accounts with no money, but many people advise against this because you will not get the feelings of fear and greed that comes from trading with real money.

Forex is traded in pairs for example GBP/USD, EUR/USD, AUD/USD, USD/JPY and USD/CAD – these are known as the major pairs and are the most traded pairs. GBP = Great Britain Pound, USD = US Dollar, AUD = Australian Dollar, JPY = Japanese Yen, CAD = Canadian Dollar.

There are an infinite amount of influences that can cause a market to move, but ultimately if there are more buyers than sellers a market will move up and if there are more sellers than buyers a market will move down. Financial news items and announcements occur throughout the day. These news items may include financial data, speeches by financial ministers or unexpected general news items. For monitoring the news, websites such as dailyfx.com and forexfactory.com are worth taking a look at. News can move markets in a big way, so it’s worth taking a look at the financial calendars on either of the websites mentioned above. One News event worth making a note of is the Non Farm Payroll, which comes out on the first Friday of every month. The data from the Non Farm Payroll will usually move the forex markets massively, so you may not want to be in the markets when this happens.

Here is a handy tool showing the ratio of buyers and sellers of the main currency pairs.

To start trading forex you will need to open an account with a broker and there are many out there, but the one I have used for years and recommend is ETX Capital in London

ETX charts and indicators are very clear and easy to use and understand. Overall, they have a good reputation.

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