Forex trading can seem quite intimidating to a beginner. With its foreign currencies and the ability to easily buy or sell and greater emphasis on technical analysis, the foreign exchange market provides a lot of new ideas and concepts that could scare a newcomer away. But there is a reason why people put forth the effort to learn Forex trading. That reason is opportunity.
Forex is the largest and most liquid financial market in the world. It is open 24 hours a day, five days a week. This means that people all over the world can trade it during the day. It also means that anyone can trade at night as well. Utilizing margin, you can easily profit from a currency going up or down, without the heavy restrictions associated with other financial markets.
In the past, the value of currencies were tied to certain commodities. The U.S. dollar for example, was tied to the value of gold or silver at various times throughout its history. If the price of gold or silver were influenced by supply and demand, the U.S. dollar would be vulnerable to the same price fluctuation.
The foreign exchange market is a market in which the relative value of currencies are allowed to float (that is, vary) against each other. This floating in price is created by the supply and demand pressure on the currency and the buying and selling pressure upon it. The reason governments allow this is for flexibility.
Forex Trading for Beginners – Currency Pairs
When you first access your Forex account, you will find what are known as the four major currency pairs:
- EUR/USD – European Union Euro / U.S. dollar
- USD/JPY – U.S. dollar / Japanese Yen
- GBP/USD – Great Britain pound / U.S. dollar
- USD/CHF – U.S. dollar / Swiss Franc
You will also find the three commodity pairs:
- AUD/USD – Australian dollar / U.S. dollar
- USD/CAD – U.S. dollar / Canadian dollar
- NZD/USD – New Zealand dollar / U.S. dollar
The reasons these three pairs are called commodity pairs is because their price movement correlates with the fluctuations of certain currencies that affect one or both of the underlying economies.
You will also see many other pairs called exotic pairs. These pairs have less liquidity than the others. This means that it is harder to buy and sell these currency pairs, because there are fewer people trading in these currency pairs.
Learn Forex Trading – Fundamental and Technical Analysis
If you watch the price of a currency pair over an extended period of time, it might not make much sense. The price will go up for a while, and then down for a while. Sometimes the up move will be longer and stronger than the down move. Sometimes the opposite will be the case. It seems impossible to pick a point in time and guess whether the market will go up or down. The trick to Forex trading is to recognize those places in the Forex market where you have a statistical edge and buy at those points.
There are two streams of thought in Forex and most every other financial market. These two paradigms are called fundamental analysis and technical analysis.
Fundamental analysis is the study of the fundamentals——the supply or demand——of the asset.
Each currency in a currency pair reflects the economy of the country backing that currency. This involves understanding the effects of economic reports and news events on the Forex market.
Technical analysis involves understanding the dynamics of price action and interpreting the patterns the price makes to find what the market has done in the past and its relation to what it will do it the future.
VPS Forex Trading – Forex Trading for Beginners and Beyond
While being able to interpret the fundamental and technical factors in the Forex market is crucially important, it is also vital to have the right tools. In the Forex market, every second matters. When you execute a trade to buy or sell, it’s very important that it go through as quickly as possible. Because in the time between your clicking on the order and the server executing that order, the price can drastically change. This is called slippage and it can spell doom for your trading account.
Another fact of life is that opportunities don’t always present themselves on your schedule. You need to be able to monitor your positions and react to the latest news and technical events. You need to be able to access your trading platform from wherever you are, whenever you are and not be tied down to a trading terminal or monitor.
Luckily, there is VPS Forex Trading. VPS stands for “virtual private server.” This is a remote server that you can access from anywhere to carry out your Forex trading. This VPS has the advantage of providing you excellent dedicated connectivity to your trading platform, so that your trades occur as quickly as possible. This helps you capitalize on every opportunity without the price changing on you, waiting for slow trade executions to complete. Once you have put in the work to learn Forex trading and become more advanced, automating your trading with algorithms can also be possible through the dedicated VPS. VPS Forex Trading is something every serious Forex trader should have.