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Forex Trading Basics - Learn The Basics And Boost Your Profits

Aug 31, 2008
You don't have to be a Forex trading genius to successfully trade Forex. Learning the basics can start you on your way to profitable Forex trading.

Forex trading has been a common practice used by traders on Wall Street and around the world to supplement their income or ear a full-time income. With increasing global trade there is an increased desire to learn Forex trading not just on Wall Street but on streets from Dallal street in Mumbai,India to Rua XV de Novembro, in Sao Paolo, Brazil. Foreign trade generates capital flow due to trade in goods, services, commodities and investments.

Much of the demand in Forex is also from speculative trading. Various factors such as weather, national and international and economic policies affect the trade imbalances. Speculators monitoring these policy changes and weather conditions predict the price of foreign currency in the future and engage in speculative trading. It has been estimated that nearly $3 trillion or more is exchanged in all currencies on any given trading day the per transaction amount can be as high as $10 million. Larger deals are also frequently done. The path to learning and leveraging Forex trading techniques has a well defined beginning but is long and continuous process.

Fundamentals

Forex trading usually can be done as a spot or forward delivery. On an average actual currencies are exchanged in two business days for spot trading. In contrast, forward transactions involve a delivery date in the future, sometimes from a month to a year in the future or more. Since forward transactions involve dealing with contracts in the future typically banks provide protection on the value of the projected flows of foreign currency by preventing exchange rate instability.

One of the important distinguishing features between regular stock or commodity trading and Forex trading is that monetary markets do not have a physical location. NASDAQ which is a premier national stock exchange in the US operates without a trading floor or a physical location. All trades on the NASDAQ are carried out "virtually", electronically using computer networks. Much like the NASDAQ, foreign exchange transactions are not executed across trading floors. Forex trading is carried out through computer networks and over the phone across countries by Forex traders.

The major players in the Forex market are typically global conglomerates that need foreign currency for their international trade and investment deals. Companies like Temasek Holdings, Dubai Investment Group, KOHLBERG KRAVIS ROBERTS & CO etc., international banks and brokers are some examples of the major participants in Forex markets.

Conclusion

Finally, in conclusion one must realize that the foreign exchange market is not just influenced by actual economic factors but the foreign exchange markets unpredictability can in turn affect the same economic variables.

Even minor fluctuations in the currency value of a country can have deep effects on the nation's commerce and general financial health. A drop in the currency value puts a considerable stress on a nation's domestic inflation as imports cost more which in turn increases the manufacturing cost of goods produced locally. Weaker exchange rates mean purchasing foreign currency is more expensive.

A stronger currency means imports are cheaper and so the domestic inflation rate is lower. Stronger currency rates mean purchasing foreign currency in exchange for local currency is cheap. Becoming knowledgeable of a currencies fundamentals can help both fundamental and technical traders to profit.
About the Author
Effective Forex Trading is your guide to profiting in the Forex market using leading edge Forex trading systems, technical analysis, swing trading strategies and much more! Trade Forex with confidence with our free Forex Trading Signals newsletter available to you now. Get your free copy now by visiting http://www.EffectiveForexTrading.com
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