By Andrew Daigle – The recent boom in activity on the forex market is attributed to the large sums of money made by astute traders, very quickly. Fast money often attracts plenty of erratic forex traders, and wreaks havoc on the market until they’ve lost their investment. If you decide that you want to trade in the foreign exchange market, make it your business to learn the information that will help you make the most profitable decisions. There are forex trading strategies that you can use, and forex indicators that will assist you, but nothing is a substitute for good old-fashioned knowledge.
Above all else, you will need to be familiar with the different currencies with which you’ll be dealing. There are too many currencies being traded on the foreign exchange market for you to simply click on one and hope for the best. If you’re just starting out trading foreign currency, it’s best to stick with popular currencies such as the U.S. dollar (USD), the euro (EUR), Great British pound (GBP), Japanese Yen (JPY), or the Swiss Franc (CHF). Exotic currencies from less popular countries are also an option, but you’ll have to improve your education to become knowledgeable about them because they are traded in very small volume and offer few profits.
In addition to familiarizing yourself with the currency, you need to understand more about their pairings. On the currency exchange market you will be trading one currency for another, so it’s imperative to know information such as the conversion rates from some of the most popular pairings. Some of the most popular pairings are; USD/EUR, GBP/USD, and EUR/JPY. When you have a better understanding of the intricacies of the foreign exchange market, you will find trading foreign currency much easier.
Next, a successful trader is familiar with other factors that may have an impact on how a particular currency will do on the market. There are two important types of analysis that every currency trader must do before making a decision; fundamental analysis and technical analysis.
Before you make any investment into the foreign currency exchange, you’ll want to continue your forex education at the library or in the newspaper. Knowing the environmental factors affecting a particular currency can greatly impact how much and if you invest in a specific currency. Events such as political assassinations, natural disasters, and economic meltdowns can all affect how markets are impacted. These events will also affect how long a trend will last, making it vital that you keep up with word events as you trade on the currency market.
Just as important as the fundamental factors are to your forex education, so too are the technical factors. You will use forex indicators and trendlines to study past trends and determine how they are likely to move in the future. When combined with the fundamental factors, the technical analysis of the foreign exchange market can greatly improve the accuracy of any forex trading strategy. The technical analysis will be confirmed by other forex indicators, and combined with an understanding of the fundamentals, will give you the clearest possible picture of where the market is heading. When you know your business through and through, trading foreign currency becomes a fun and easy way to make money.
About the Author
Andrew Daigle owns many successful websites including ForexBoost , a free Forex educational site to learn Forex trading strategies and partners with FX Instructor for live forex trading sessions and professional educational services.