A Better Understanding of Forex Trading

forex trading

Have you read the words forex trading on the Internet or in the newspaper and wondered what those words refer to? I use to wonder as well, so I did some checking. Turns out that forex trading is basically the exchange of one currency for another. Sounds simple, right? I mean as a Canadian every time I look at traveling to the U.S. the first thing I think about doing is checking the exchange rate between the U.S. and the Canadian dollar. Actually, over the past 12 months that particular exchange rate has been quite volatile.  But I digress.

Yes forex trading includes all foreign exchange currencies, but from what I understand, when trading currencies you should begin by focusing on one pair. By that I mean that you should focus on trading one specific currency for another. For example you could trade EUR/USD, which is European Dollar versus the US Dollar.

How to Achieve the Best Bang for Your Buck With Forex Trading

When it comes to forex trading there are several things that you can do to achieve the best bang for your buck. Let’s review some of them.

Keep things simple. When trading currencies the worst thing that you can do is to micro manage your account. Instead of trading multiple times throughout the day or the week, you will make more money if you remain patient and take things slowly. Begin with one trade and then leave your account for a month or two to see how rates have changed.

Focus on what is known as higher time frame charts. When you trade based on the higher time frames you get a clearer picture of what is really happening in the market because most of the erratic market noise of the lower time frames is eliminated.  It is important to understand that higher time frame charts provide a more accurate illustration of price movement which will help you to be more confident in your trading decisions.

Develop a trading mindset. Whether you do forex trading or trading on the stock market, your decisions should never be emotionally based. Likewise you wouldn’t go to the race track and bet on a horse named Daisy-Mae because you really like the name Daisy-Mae. The emotional side of trading forex is what causes so many people to lose their money and to give up trading. Instead, read the charts, keep a journal, and don’t get carried away. Avoid approaching forex trading like a fun game of Monopoly. Take it seriously.

Understand forex trading strategies. As you become more involved in forex trading you should develop a strategic trading plan that will help you make more money over the long term.

Begin with a free demo account. Understand that Forex trading is a complex subject and it can be risky. Many people take up to 3 years to fully understand all of the terminology. The advantage of beginning with a demo account is that you can learn how to read and fully understand the Alpari’s Forex charts and analysis tools, and do some trades, without risking any of your own money.


    • Holly@ClubThrifty

      Holly@ClubThrifty 08/22/2012 5:28 a.m. #

      I had no idea- thanks for sharing!

      Have a great day!

    • Nurse Frugal

      Nurse Frugal 08/23/2012 9:06 a.m. #

      I had no idea what forex trading ever meant!! Do you know what is a good percentage earned with forex trading?

    • Ebineta12

      Ebineta12 09/12/2012 3:07 a.m. #

      Nice article! If you are new to the Forex system trading, you need to know all pertinent information about it before attempting to participate in a Forex trading program. You may need a Forex tutorial or a Forex software trading to be able to succeed in this new business arena.

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