Forex: Currency Trading Demystified

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by: bsullivan
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Date: Sat, 8 May 2010 Time: 7:32 AM
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Forex and forex trading aren't just buzzwords bantered around by financial advisors and television commercials - forex is currency trading…money. The word forex (FX) is shortened for foreign exchange. The Foreign Exchange markets are a global over-the-counter (OTC) market. The Forex markets are leveraged, and as an investment vehicle, currency trading is a valuable part of a diversified portfolio. With proper account management, risk-to-reward ratios and position sizing, forex can be a winning part of your own retirement strategy.

How Do You Trade Forex?

Currency trading is done in currency pairs. Most world currencies are available in one pairing or another. For example, US dollars for Canadian dollars is expressed as CAD/USD $0.9024. The currency pairs are listed to four decimal places. The smallest amount of movement possible is called a PIP. Money is fairly stable; if it weren't the world economy would really tumble. However, economic and perceived factors can influence the valuation at the PIP level. Since not all money is valued equally throughout the world at the same time, it is possible to profit from its trade. The value of money is volatile and subjective to economic news and anything else that may impact economic conditions.

Who are Currency Traders?

Currency traders are large and small; private and public. They live around the world. They are engaged in legitimate business, investment and speculation - sometimes all of these at once. The purpose of forex started as a means for international companies to conduct business with each other. Central banks and other institutions such as the IMF and World Bank help to support the Forex markets.

When Do You Trade Forex?

Since the world is always awake somewhere, you can trade currencies 24 hours a day, six days a week - the market opens Sunday at 3:00 p.m. (Mountain Time Zone) and closes on Friday at 3:00 p.m. (Mountain Time Zone). Should you trade 24 hours a day? No, most definitely not. This goes for any trading, not just forex. Trades should be carefully planned. Positions should be sized accordingly. Stop losses and profit targets should be calculated as well as exit strategies. Some careful market observation with a healthy dose of forex analysis should lead you to the profitable trades.

Where's the Information?

All you have to do is know where to get the information. That is the tricky part. Market information is everywhere. By "market information," I mean information that the markets already "know." News, events and information you get through the market isn't always timely and it definitely wasn't put out for your benefit. Most sources of forex news come with a string attached. Beware the infomercial, leading you to pay someone for its hot tips. If their tips were so hot, they wouldn't need to solicit you for money. The only real data you can trust is prime - data from the source. Prime data comes from places like the central banks of countries, government sources like payroll data and current prices on currency pairs. There are some online tools out there to help you find and analyze this data.

ForexEgg.com: Currency Trading Toolbox

There is a huge difference in the types of online sources when it comes to currency trading tools. Most are merely seeking your commissions and lack substance. This is not the case with ForexEgg.com - a totally free site and a leader in timely market information. It is on this site that you will find in-depth forex market analysis and up-to-the-minute quotes as well as links to the world's central banks and their own proprietary forex analysis tools. Prices for all currency pairs are listed with up-to-the-minute quotes. An economic calendar helps you keep up with potential market moving events at home as well as abroad. An additional bonus to ForexEgg.com, not found at other free sites, is their proprietary analysis tools which help the savvy forex trader make informed decisions.

For more information visit: http://forexegg.com

About the Author

Tommy Hughes is a successful and largely self taught economy watcher and market speculator. He has extensive knowledge of risk management and asset allocation, stock and options trading as well as market analysis. Tommy has worked in the fast paced restaurant industry for over 15 years. Tommy also writes for food publications such as Becket Media's "Grilled" Magazine. Tommy enjoys mountain biking and brewing beer. Tommy lives in the Asheville, North Carolina.

For more information visit: http://forexegg.com