Logic behind Currency trading

This resource provides information about the logic behind the currency trading.

Forex trading basically involves currency as the trading material and are easier when compared to other stock based trades. Of course, the strategy of the trading sequence is difficult but not the trade itself. With the advancement in internet and technology, a massive impact has been created on forex market. Now it's easy to monitor and trade in forex from anywhere. All you need is a secured internet connection and access to the market.

Forex trading is based on bid/sell method. As with any other stock market is concerned, in forex, you buy/sell currency pairs. I shall explain this logic with an example, so that you understand things better.

Now say, you want to make profit out of the smallest investment you have made with the USD. All you need to do is to monitor the market rate of other currencies. In forex, let us assume that the flow of USD drops significantly. The traders on the other end, who can pay you in Euro, will offer a bid for the USD's which you have invested. The value awarded for the Euro will be higher than the equivalently invested USD. You can either accept the bid or hope for an increased value. On reasonable hikes, you will be paid the amount for the USD you drop in for the trade.

Only registered traders are eligible to participate in this auction process. Other traders who are online speculators will trade through a bank or brokers. Brokers, for such trades, charge a commission. It is important to calculate all these transactions, including the brokerage, since this will sway the profit account.

The global forex market trades around trillion dollars, a single day. Many traders lose money by sheer miscalculations and multiple inputs. It is not a bed of roses. One should be very careful when playing with forex. It is better not to invest any money that is not affordable into the forex trading market, since it is a fact that success and profits are not claimed just because you have invested.

The world of internet and online trading has given the traders a lot of advantage. You can also ask for a demonstration account to your broker to play with. Advanced technology like oscillators can also help you to determine the value of the forex trade. But, blindly believing in any of these for trade can be in vain. These can be used for analyzing purposes. Also, it is a fact that the forex market is pretty stable when compared to the other stock markets. Long term plans are more useful for intraday plans. To make the most out of the currency trading, it is important to know what you do by yourself.

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Author: Pravat Kumar Das04 Sep 2014 Member Level: Gold   Points : 5

The reason behind more than 85% traders are loosing there money in Forex ( some of them reinvesting to recover the losses and some of them totally leaving the market).

1- Lack of knowledge.
They do not know what is the right level for entry and exit from a position.

2- Thinking Forex is a money making machine.
By seeing attractive advertisement many new traders think that there $ 100 USD can become 1 million and start trading with out knowing the fact behind the price movement depending upon luck.

3- Lack of patience.
Knowledge and money does not come by over night.
Many trader try to double there money in single executed trading.
Which cause them fully loss of there invested amount.

So learn, gain proper knowledge, trade with small quantity, which helps you to protect your capital and sustain you in market for longer period and help you to gain huge profit in long run.

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