Monday, March 3, 2008

Introduction to Forex Part 1

What is Forex?

Forex is the short form for Foreign Exchange or it is most commonly known as currency market among savvy traders. It is the most liquid market on the planet with at least 1.5 trillion traded daily. And it is relatively similar to stocks trading as in the Wall street, and the only difference by the simplicity to apply for the trading. Usually stocks will require physical brokers to help the client to execute and manage their activities but forex are totally control by the client themselves. Therefore the process of trading are much simpler especially after the emerging of internet technology available today to provide live trading service on your PC.

The currency market is available for trading 24 hours five days in a week from Monday to Friday.

Anyone is eligible to join trading as long as they have the money!!

How to make money by trading forex?

Very simply!! When the market/chart go up you buy (long) you will make profits. If the market go to the opposite direction you make losses. Other wise when the market go down you sell (short) in order to make profits and if the market go to the opposite direction upside you make losses.

In simple: UP = BUY | DOWN = SELL

What cause the market to go ups and downs?

The fluctuation ups and downs of the market are the results of traders activities of buying and selling the forex. Traders make their transaction activities after analyzing the market based on fundamental and technical analysis available. Different traders will make different decisions based on their logical analysis however the results can be gaining or losing depending on which side the majority they are. If they joint the majority with the most money they will be the winning party or otherwise losing. Thus all the activities created a patterns reflected on the chart as you can see below.

Forex Terminology

Bull => The market is bullish when the trend is moving upwards direction

Bear => The market is bearish when the trend is moving downwards direction

Pips = Pip or sometimes call point is the measure of profit and loss in forex trading. It is approximately 1% of the money traded. For example if you trade $1000 and earn 1 pip that means you will make profit $10. That means if you make 100 pips you will earn $1000 which is 100% of traded amount.

Long/Buy => The term use when trader decide to make a buy position where he/she expect the market to go up.

Short/Sell => The term use when trader decide to make a sell position where he/she expect the market to go down.

Candlestick => Candlestick is one form of chart which designated by 2 colors usually black and white. Unlike line chart which is very general, candlestick can show details of traders emotions. Therefore some traders especially the Japanese use this candlestick as their analytical tool which give it a name as Japanese Candlestick charting.

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