Forex For Newbies - A Quick Currency Trading Tutorial

Forex For Newbies - A Quick Currency Trading Tutorial

The more you understand about any subject, the more interesting it becomes. As you read this article you'll find that the subject of forex is certainly no exception.

So, you want to learn how to trade currency on the foreign exchange market? The process of trading currencies appears very straight-forward on the surface but, there is more to it than meets the eye.

The currency trading tutorial you are about to receive here will give you a basic idea of how things works. However, you must keep in mind that this tutorial is only scratching the surface. The Forex market is complex, fast-paced and requires serious further study if you wish to trade successfully.

Now that we have that disclaimer out of the way, let's begin by looking at the fundamental unit involved in every trade: the 'currency pair'.

What are currency pairs?

Currency pairs are units of 2 currencies involved in a foreign exchange trade. For example, if you want to sell U.S. dollars to buy Euros, you would look at the exchange rate quoted for the EUR/USD currency pair. Or, if you wanted to sell Euros to buy U.S. dollars, you would look at the exchange rate quoted for the USD/EUR currency pair.

You might thinking: "Aren't they the same thing?" Well, they almost are, but you must look at the correct pair, in the correct order, based on the currency being purchased.

There are two reasons for doing this:

First, it is easier to calculate the results of your exchange in terms of how much of the base currency you can purchase with your 'quote' currency. Your base currency is the currency you intend to buy, and the quote currency is the currency you intend to sell in exchange for the base.

When quoting an exchange rate, your broker will list the base currency first in the pair, and the quote currency second.

This means that when you see a pair like EUR/USD, you are seeing the cost of 1 Euro in U.S. Dollars. An exchange rate quote of EUR/USD = 1.4436 means that 1 Euro costs $1.4436 in U.S. Dollars.

Hopefully the information presented so far has been applicable. You might also want to consider the following:

Likewise, the USD/EUR pair indicates the cost of 1 U.S. Dollar in terms of Euros. An exchange rate of USD/EUR = 0.6834 would mean that 1 U.S Dollar costs 0.6834 Euro.

The second reason for looking at the correct buy/sell ordered pair is that you'll want to know the difference between the 'bid price' (exchange rate) and the 'ask price' (what the market makers want for the currency).

The difference between bid price and ask price make up what is known as 'the spread'. Forex traders are subject to spreads when opening or closing trades in the buying position.
In other words, you are always subject to a spread when you buy, regardless of whether you are opening or closing the trade.

Open buy -> spread

Close sell -> no spread

Open sell -> no spread

Close buy -> spread

Let's say that you want to buy the EUR/USD pair. The bid price is 1.4436. The ask price may be something like 1.4440. You must pay the spread of 0.0004 in order to do the trade.

Those are the basics of a currency trade, but there are other factors to take into consideration. In order to make a profit on currency exchanges, you must also know how
to calculate the cash value of exchange rate fluctuations in terms of 'basis points' - or, in Forex jargon - 'pips value'.

This currency trading tutorial will not cover pips values, but it is a concept you should investigate further if you want to master the basics of trade on the foreign exchange.

So now you know a little bit about forex.

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Forex Basics - An Exchange Rates Tutorial

The following paragraphs summarize the work of forex experts who are completely familiar with all the aspects of forex. Heed their advice to avoid any forex surprises.

Profits are gained and lost on the foreign exchange, or 'Forex', market due to fluctuations in the exchange rate. This fact may seem like common knowledge, but one should not take for granted how exchange rates are determined.

There is actually a very rich history behind the concept of the exchange rate, and it is important that you understand why things came to be as they are -- as well as how to capitalize on that knowledge.

This quick tutorial on exchange rates will help you do just that.

First, let us look at the simplest definition of an exchange rate. An exchange rate is the value of one currency in relation to another. If one U.S. dollar is worth $1.20 Canadian, then the exchange rate is 1:1.2, or 1.2 for the CAD/USD currency pair.

What does this really mean, though? Why is it that one currency can be worth more than another, and who decides?

If you look back to the earlier part of the 20th Century, you will recall that most currencies of the world were back by precious metals, like silver and gold.

It used to be that the United States followed the 'gold standard', which 'pegged' the Dollar to the price of 1 ounce of gold. All other currencies were then 'pegged' to the Dollar and allowed to fluctuate in either direction by a margin of no more than 1 percent.

This type of exchange rate, although it allowed for minor fluctuation, was considered a "fixed exchange rate".

If you find yourself confused by what you've read to this point, don't despair. Everything should be crystal clear by the time you finish.

Now, fast-forward to the latter half of the century, and you find that the 'gold standard' has been dropped, along with the fixed rate model of exchange. Instead, the foreign exchange market now operates primarily on a 'fluctuating exchange rate'.

Fluctuating exchange rates are governed by the market forces of supply and demand. If the demand for a currency exceeds the supply, then the exchange rate (and value) of that currency will rise.

Likewise, if the supply of a currency exceeds market demand, then the value of that currency (and its exchange rate) will drop.

We see this happening today with the U.S. Dollar. In order to keep up with government spending, the federal reserve prints more and more dollars, then sells them to other countries as 'debt'.

The market forces which previously gave the dollar its strength -- such as oil exports and oil transaction denominated in U.S. dollars - have eroded. Thus, we not only find the exchange rate of the dollar weakened, but also the exchange rates of many of our closest trading partners.

The Japanese Yen, for example, has fallen even more than the dollar. Part of this is due an overall crash in the Asian market, but it is also linked to the fact that much of Japan's economic growth at the end of the last century depended upon exports to the United States.

This is just one example of how market forces affect exchange rates, but it is a useful one for examining some of the factors involved in rate fluctuations.

If you would like a real world exchange rate tutorial, I recommend opening a demo trading account with an online broker. Do some test trades to get a feel for things, and make note of current exchange rates.

Then, make sure you stay abreast of world and financial news, and see if you can spot the relationships between major announcements and rate fluctuations!

When word gets around about your command of forex facts, others who need to know about forex will start to actively seek you out.

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Getting the Most Out of Forex Trading Tutorials

The following article includes pertinent information that may cause you to reconsider what you thought you understood. The most important thing is to study with an open mind and be willing to revise your understanding if necessary.

The foreign exchange market is one that has only recently been made available to regular investors. Because of this fact, the Forex market has risen to be not only the most popular, but also accumulates more than $1.3 trillion dollars each day. These facts make this fast paced market one of the most sought after however there are some precautions and investments of other types to make.

Jumping into the Forex market without the essential tools and knowledge that can be gained from Forex trading tutorials can be a very dangerous thing to do. The Forex market is a complex place to be for beginners and that is predominantly why most brokers offer free tutorials to potential investors that are new to the market.

Forex trading tutorials not only educated the investor on the intricate workings of this market, they also enable the user to practice their own ideas by way of a simulated environment. This is an empirically important aspect of the tutorials because without that experience of practice, most raw recruit investors end up losing the farm. Taking measures to safe guard against losing financial investments should be taken and outlined in most tutorials that are presented to the investor by the broker or brokerage firm that the investor has chosen.

The best time to learn about forex is before you're in the thick of things. Wise readers will keep reading to earn some valuable forex experience while it's still free.

Being exposed to the actual Forex market without actually losing or gaining money is among the best teaching tools available. It is the main component to look for in any Forex trading tutorial that is chosen. These programs will offer the investor all of the training tools that are needed to begin a productive career in foreign currency trading. While this is an exciting and fast moving market, the Forex trading tutorial will help break it down into smaller sections enabling the user to gain a deeper understanding of the market.

That being said however, the tutorials that the investor choose should also develop personal strategy and trading theories. After all, being told what to do doesn't exactly enhance the experience because eventually that method is doomed to fail. The tutorials help develop and nurture individual trading skills thereby giving the investor more confidence and assurance that he has complete control over his investments. Lowering the risk of losing money is attractive to any financial investor and starting out with the proper mindset and Forex trading tutorial will ultimately pay off. Remember the Forex market is not a get rich quick scheme and anyone that says so, is simply trying to take your money. Forex, like any economic market takes research, education and discipline in order to be successful. Pick up a Forex trading tutorial today and begin securing extra income soon!

There's a lot to understand about forex. We were able to provide you with some of the facts above, but there is still plenty more to write about in subsequent articles.

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Can You Really Become Wealthy Trading in Forex?

The following article includes pertinent information that may cause you to reconsider what you thought you understood. The most important thing is to study with an open mind and be willing to revise your understanding if necessary.

Forex trading has recently become a major focus of many wanting to earn extra income and even build wealth. This is mostly because the world economy is in turmoil and no longer provides the sense of security that workers used to have. Mass layoffs are the order of the day as more and more companies succumb to the economic crisis. This has led to more people thinking of additional ways to earn money.

The Internet offers a myriad of ways to supplement one's income while keeping one's current job. A lot of online programs have become very popular as they promise financial freedom and stability.

Forex is one of the new ways for many people to gain financial freedom. For some, it has moved to become a full-time job from being the past-time wealth building facility. Actually, forex trading is nothing new. But usually only banks and many large multinational companies used to indulge in forex trading, i.e., trading foreign currencies.

It seems like new information is discovered about something every day. And the topic of forex is no exception. Keep reading to get more fresh news about forex.

Earlier, currency was traded only by the biggies of the financial world, namely the banks and the large corporations since it was only they who had the resources to gain knowledge about the markets. But since then, the situation has changed with a lot of ordinary people trading in currency via newly emerged softwares specialized for the same. Ever since the softwares, a lot of new people have jumped into the field of forex trading.

Daily, more than $4 trillion dollars is being traded, that shows the lucrative aspects of this industry that can make someone with a lot of insider information, very wealthy. While many think that forex trading is quite like stock trading, there some fundamental differences between the two of them. The major difference between the two is the forex prices have lot more fluctuation that the stock prices, which depends on those who deal with the same unlike in the stock market. Large banks usually have a say in the price-setting who deal in the forex of million dollars.

For people who want to build wealth conveniently, forex would be a boon to them. Even ordinary people are realizing its importance and getting into this business in large numbers; and the softwares that are available only accentuates the number of people getting into forex trading. With such ammunitions, even amateurs trade like professionals, and the market has no longer been dominated by only the financial mighty.

Forex Wealth Builder is one of the best softwares available that is very convenient to help in the business with its easy-understand flow. This helps even an amateur with no information or knowledge to get into forex and trade like professionals. It even includes practices with test-trades to understand better and test their skills in the system. People can thus work keeping their jobs at their own pace, while watching their wealth profits grow.

Of course, it's impossible to put everything about forex into just one article. But you can't deny that you've just added to your understanding about forex, and that's time well spent.

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