For those that want to learn Forex trading, there’s a long road ahead, and a steep learning curve. Just like most things in life, it always sounds easier in theory. This is certainly no different for those that want to learn Forex trading. There is good news, however, for those that stick it out. Once a few basics are covered, then it’s just a matter of putting a proper strategy together. But sometimes it’s the basics that trip people up the most.
Learning forex trading is not easy
What is the Forex
Those speculators new to Forex, the market in a number of different ways. They go to school, or take courses. And many more that are new to Forex will learn trading the hard way. The first thing any new speculator needs to understand is what the market is, and what it does. The Forex market is unlike any other, and the amount of money traded on a daily basis proves this notion. On any given day, there is over $4 trillion traded on the Forex market. When compared to the $74 billion traded on the NYSE, this is the giant among giants. There is serious liquidity that is unrivaled by any other market on the planet.
One of the most unique aspects about the Forex market, is that it isn’t just for one particular country. People from all over the world actually participate in this market. For this reason, this market stays open 24hrs a day Sunday through Friday. Those new to Forex learn trading in hours that are more flexible to them.
What to trade
So, what do the people trade? On other exchanges, speculators trade for a piece of ownership in a certain product or business. The Forex market is a little bit different, in that they are trading actual currencies. Some of the more popular ones include:
These currencies are put together in what is called pairs. Newcomers to Forex learn trading these pairs above more often than not. A good way to think of it for those that want to learn Forex trading, is to imagine someone going away on vacation to a foreign country. When the person arrives in that country, they will need to exchange their currency for the new country’s currency. A week later they are ready to return home. The value of their home currency has gone up in comparison to the foreign country’s currency. What this means, is that they will now hand over their vacation money in exchange for their home currency at less value since their home currency went up. This means a loss in value. On the other hand, if the country they are visiting has an increased value of their currency, the vacationer stands to make money on the transaction.
How it is traded
Those looking to learn Forex trading, also need to understand how it’s traded in the first place. In some aspects, it is similar to that of any other stock market. There is a buying price, and a selling price. This is represented in a bid/ask equation. The bid is the price someone is willing to pay for a particular currency pair. The ask price is what someone wants to sell their currency at in hopes of gaining a profit when they buy it back. This is often the most difficult part for people to understand when they learn Forex trading.
How to predict movement
Beginners to Forex learn trading in roughly 2 basic, but different areas. The first is considered to be fundamental analysis. The second is technical analysis. Many arguments have been placed over which one is the most accurate. Some people have great success just with technical indicators, while others only look at non farm payroll reports to predict what their currency market will do. In short, they’re both right. It’s important that new speculators to Forex learn trading in both these areas of market analysis.
Fundamental analysis takes on a broad scope of factors to pinpoint down what the currency will do. Some traders look for trends in GDP of the two countries they are comparing. Another type of fundamental analysis can include news headlines. It’s amazing what bad news and good news alike can do to a currency within a short amount of time.
The other style, for those looking to learn Forex trading, is technical analysis. This is primarily done just by reading charts and noticing trends. This also takes a lot of grit and determination. The charts are compared to historical data, and this data has a long history. However, those that can decipher these charts will see clear patterns emerge.
Types of traders
There are also different styles, that those new to Forex learn trading. For casual, or more conservative types of speculators, they are usually drawn to swing trading and trend trading. Trend trading is probably the most conservative of all styles. In other stock markets, it’s also referred to as buy-and-hold. Here the speculator feels a trend may not reach its true potential for six months to a year, or even longer down the road. Swing trading is kind of a middle-of-the-road style. These types of trades can last anywhere from one day to a month. This type of speculator likes to play it safe, but still wants a degree of interaction.
A third style of trader, is the day trader. This speculator likes to live life in the fast Lane. Their trades can last a few minutes to a couple hours, but generally their positions will be finished by the end of the day. There is even a kind of sub category to the day traders. These are called scalpers. Scalpers can sit on a position for just mere seconds while trying to catch a momentary upswing for profit. This is highly interactive, and can be dangerous to a person who has just started to learn Forex trading. Newcomers to Forex learn trading in one of these fashions, and usually decide quickly which is more their speed.
Forex is an exciting world, that can also be a rewarding one to those who put in the effort. Make no mistake about it though, there is a huge learning curve. For those that want to learn Forex trading, they have a long road ahead of them, if they wish to see the real beauty of leverage.