How to Read a Currency Pair
Forex traders that are looking for ways to gain an edge in the financial markets will need to make sure they have mastered the basics before any real money trades are placed. So if you are looking to learn how to trade Forex, there are some key points that you should have covered before you actually get started. This can help you to limit the potential for losses and to grow the potential for gains all at the same time.
Comparative Currency Values
The first point to remember is that any time you are trading in the Forex markets, you are actually exchanging one currency for another. In the world of Forex trading, currencies do not have value by themselves -- they only have a comparative value that is expressed as a Forex quote. So if we are looking at the EUR/USD, the number that is given as its value shows the number of Euros that can be used to buy the US Dollar. If we are looking at the GBP/JPY, we can see that number of British Pounds that can be used to buy one Japanese Yen.
The first currency is referred to as the base currency and the second currency in the pair is referred to as the counter currency. So if you believe that the first currency is likely to rise in value, then it is generally a good idea to take a long position (buying the currency pair). If, however, you believe that the second currency is likely to rise in value, it is generally a good idea to take a short position in the currency pair. Recent market reports from Mocaz Financial Markets Limited have shown that many Forex traders fail to understand many of these factors and yet still put money into the market through trades. This is a practice that should be avoided as much as possible because this is something that can quickly create losses that are almost totally unnecessary.
With all of this in mind, it should be remembered that some basic concepts should be understood before any real money trading activity actually takes place. Instead there are demo accounts that can be used to place virtual trades under live market positions. This can be extremely helpful in terms of the way it can help traders to learn how exactly the market operates without putting real money at risk. To some, this might seem as though it is not a necessary part of the Forex arena, but those of us that have already lost money in these ways understand its true importance and its place within a broader trading career.
Article Source: http://EzineArticles.com/9097999
Forex traders that are looking for ways to gain an edge in the financial markets will need to make sure they have mastered the basics before any real money trades are placed. So if you are looking to learn how to trade Forex, there are some key points that you should have covered before you actually get started. This can help you to limit the potential for losses and to grow the potential for gains all at the same time.
Comparative Currency Values
The first point to remember is that any time you are trading in the Forex markets, you are actually exchanging one currency for another. In the world of Forex trading, currencies do not have value by themselves -- they only have a comparative value that is expressed as a Forex quote. So if we are looking at the EUR/USD, the number that is given as its value shows the number of Euros that can be used to buy the US Dollar. If we are looking at the GBP/JPY, we can see that number of British Pounds that can be used to buy one Japanese Yen.
The first currency is referred to as the base currency and the second currency in the pair is referred to as the counter currency. So if you believe that the first currency is likely to rise in value, then it is generally a good idea to take a long position (buying the currency pair). If, however, you believe that the second currency is likely to rise in value, it is generally a good idea to take a short position in the currency pair. Recent market reports from Mocaz Financial Markets Limited have shown that many Forex traders fail to understand many of these factors and yet still put money into the market through trades. This is a practice that should be avoided as much as possible because this is something that can quickly create losses that are almost totally unnecessary.
With all of this in mind, it should be remembered that some basic concepts should be understood before any real money trading activity actually takes place. Instead there are demo accounts that can be used to place virtual trades under live market positions. This can be extremely helpful in terms of the way it can help traders to learn how exactly the market operates without putting real money at risk. To some, this might seem as though it is not a necessary part of the Forex arena, but those of us that have already lost money in these ways understand its true importance and its place within a broader trading career.
Article Source: http://EzineArticles.com/9097999
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