The first lesson when an individual decides to pursue Forex Trading
is – To understand the way Forex Market functions; what makes the market
tick, what triggers the moves, and are the things most likely to
changes market’s course, what are trading decisions based on, and so on.
Trading can happen in many ways, and each trader according to his
basic style of thinking, and working temperament will adopt a specific
trading method. We all start at the same place (learning the basics and
getting acquainted with various trading concepts like we are doing right
now) but as time passes and exposure increases, the trader begins to
understand trading, as well as himself under different circumstances
more clearly; as an outcome of this some traders will go on to establish
themselves as long term investors, some will be short term speculators;
some will be swing trading experts and so on. From there onwards they will go on to the next phase and take the advanced journey.
In second phase where trader will try and learn as much about his own
style of trading, in third phase they are bound to feel more in control
because of all the information and will learn to combine various
trading styles to their advantage.
So what is it that traders are exactly expected to learn to become
successful trading professionals? What are the concepts they have to get
acquainted with which will help them to stay in business long term and
make money
in it? Well, they have to learn everything that they can about
following things; online Forex trading; types of orders; spot and
forward trading; types of charts; technical indicators; its basics; economic indicators; candlestick
analyses and so on. When trader learns about all these and how to
combine and use them in different ways will he be considered on his way
to becoming a race horse.
Let us first understand everything about Online Forex Trading.
Until a few years ago Forex trading was only allowed to be carried
out by financial institutions and banks; however with the advent of
internet technology, things changed forever for everyone 360 degrees,
Forex being no exception. Now with internet access, Forex is a 24 hour
market and can be accessed and traded by any individual who wishes to do
it across the globe post completing certain formalities like opening an
account and depositing margin money, getting acquainted with rules of the broker and market policies etc.
Currency trading always happens in pairs; where one currency is
bought and the other is sold and this buying and selling happens
simultaneously. The main motive behind doing this is when trader is
buying one currency and selling the other it is based on the assumption
that market environment will change and it will lead to rise in price of
the currency trader has bought as compared to the other one that the
trader has sold.
In the pair the first currency is called the base currency and the
subsequent currency is called the quote currency. Quote currency is
expressed in one unit. For example in EURUSD currency pair EUR is the base and USD is the quote price.
Then the next thing is to understand `bid price’ and `ask price’. Bid
price is the price at which buyer is willing to buy the base currency
in the open market in exchange of quote currency; and ask price is the
price at which the holder of base currency is willing to sell it and
buyer is ready to buy at that price in exchange of the quote currency.
The difference between `ask price’ and `bid price’ is called the spread;
spread is another common term that will frequently in use while trading
Forex.
In this post we have learnt the basics of online Forex market, what
goes into Forex trading; and aspects traders need to get acquainted with
to trade long term and successfully. Plus what are bid and ask prices.
In next lesson we will learn about Fundamental and Technical Analyses,
& psychology of trading.
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