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The ABCs Of Forex Trading

The ABCs Of Forex Trading



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FOREX - The Basics

By : Ian C Jackson
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FOREX or simply FX as it is more commonly known, is the trading of currency pairs on the Foreign Exchanges of different countries so. Some currency pairings are for instance, the US dollar and Canadian dollar, US dollar and the UK pound, the UK pound and Japanese Yen. There are around forty pairings, so there is plenty of choice and scope. When the institutions of one country do trade with those of another, they will have to convert the currency back into their own, hence the term Foreign Exchange. As such it has no exchange, in the sense of a stock exchange. It is traded in an over the counter type manner.

The main factor that makes FOREX unique amongst all the other methods and procedures for trading the markets is that it is available and open for trading 24 hours a day during the week, from 20.00 hrs (GMT) on Sunday until 22.00 hrs (GMT) on Friday. This makes it so much more appealing to many traders and investors alike.

There is also so much more liquidity in the Foreign Exchange trading market compared with the others, owing to the huge amount of money being traded.

FOREX is also the largest market being traded, with almost two Trillion dollars being traded daily. Besides its high liquidity it is also quite volatile so that makes it ideal for applying a method of trading known as scalping.

Scalpers will enter and exit a trade within a very short time frame, often only for a few minutes. This, once mastered is an excellent way to trade, since with a good strategy, an appropriate management strategy and the correct discipline, one needs only very minimum exposure. It can be quite daunting to the uninitiated but once learned it is highly lucrative and returns of one thousand percent per annum are not unusual. Also because of the minimum exposure it frees up one's time for most of the day.

Since the currencies are traded in pairs, one against the other, unlike conventional shares, there is no bull or bear market. One buys or sells one side of the pair whilst at the same time, doing the opposite with the other.

When trading the FOREX market, it is important to aim for minimum exposure both in terms of the percentage of capital with which one trades and the duration taken to execute ones trade. By learning and using a combination of the right system and sound discipline, this should be, with practice, not a problem. One thing to consider whilst learning is that many trading systems these days offer free training accounts, or paper trading accounts. Take advantage of them and gain confidence first.

About the author:
Would you like discover more about the systems successful traders use to make profitable trades? Download them free here: Trading LessonsIan Jackson is well read in the online trading business, learning how to trade the hard way - and now he reveals how you can learn the business too, without all the growing pains.

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