Saturday, March 15, 2008

The Nature of Forex Market

As far as forex is concern this is the most liquid and dynamic market on the planet. There are billions of money are traded every second or minutes as you can notice on the volatility of the chart movement. This volatility creates great opportunities for traders to make money as quickly within minutes of trading. The opposite also true as traders can lose their money within minutes. Our goals as traders are to minimize risks and maximize profits with the help of all the tools and experiences available to master the dynamic market.

There are no 100% precise or exact setups any traders can make in their trading activities. The reason behind this is because trading involves emotions as reflected on the candlestick chart designated by the tails of the candles. Everyone has their own analytical formula and amount of money they going to spend on the trading, thus there is no way we can predict when and how much money they are going to use for trading. As a result any trader will never have 100% setup otherwise only by chance sometimes.

Fortunately today every trading platform is equipped with many technical tools available to help traders to analyze the market physic. And most importantly using these technical tools we are able to estimate the size of the entire market volume dynamically and therefore be able to determine the ultimate limit of every movement. I shall discuss further on this in the later chapter of this blog on technical analysis tools.

An interesting historical event called “Black Wednesday” has taken place in September 1992, where George Soros a CEO of hedge fund company has ripped a profit of $1 Billion USD by shorting/selling the GBP-USD pair which a day period. And the Bank of England went panic as they loss 3.4 Billion Pound Sterling to the currency speculators and most of the money goes to Soros of course. Read more of this story from wikipedia "Black Wednesday"

This one event to remind us all no matter how good we are there are always aware of the unexpected danger that traders are facing in the forex market. Even a great financial institution like Bank of England has been through this experience.

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