Forex currency trading basics

Currency trading is all about buying and selling monies with money. It has to do with the buying of a currency and the subsequent selling of another currency in the foreign exchange market which is mostly known as the forex market. The basics of forex currency trading is about understanding how currency trading is done, the risk involved in trading currency, the change of value of currencies, the various movement seen in the currency market and its price movements.

HOW FOREX CURRENCY TRADING WORKS

Currency trading is a round the clock market that only takes a break fromFriday evening to Sunday evening. They are three main seasons in which currency trading is conducted. They are the Asian, European and the United States currency trading season. The most important currencies in the world are mostly traded in these seasons meaning that they are some currency pairs that have more trade volume than other at certain seasons even though they may show some overlaps. Traders who trade the currency market based on the dollar will make more profit during the United States currency trading season.

CURRENCY PAIRS AND PIPS

All forex currency trading is done in pairs. A currency trader has to buy one currency and in return sell another currency in the forex market. In terms of pips, all the prices of currencies are seen in four decimal points. A pip is said to be the smallest increase in a trade. One percent in a point is equal to 1/100 of one percent. Most new traders trade currency in units of micro lots which represents 10 cents move in the price of a currency for one pip. This technique helps to manage losses easily when the trade fails to produce the intended results.

FOREX CURRENCY TRADING HAS TO DO WITH FEW CURRENCY PAIRS TO TRADE WITH

Forex currency trading has to do with only 18 major currency pairs even though they are other traded pairs in the currency market. The U.S. dollar (USD), Japanese yen (JPY), Canadian dollar (CAD),Australian dollar (AUD), euro (EUR), New Zealand dollar (NZD), British pound (GBP) and the Swiss franc (CHF) are the eight most frequently traded currencies in the forex market. Even if forex currency trading is not seen as being easy, having less trading options makes the trade relieving.

FACTORS THAT MOVES THE FOREX CURRENCY MARKET

One of the major factors that move the forex currency market is demand and supply. Then more dollar is needed by traders, the value of dollar tends to rise and when dollar becomes surplus in the market, the price of dollar drops. The second factor is the interest rates, economic and geopolitical factors have great influence on currency prices.

In conclusion, learning and studding about forex currency trading is easier than finding the winning strategies in forex trading which takes a lot of practice. You should know the principals and basics of currency trading before embarking on a trade.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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