Forex tutorials

BASIC FOREX TRADING TERMS AND CONCEPTS.

The foreign exchange market is a popular market for investors. With the economic recession causing financial problems for people around the world, more people are turning to the forex market to earn some extra income. For beginners, the forex market can be confusing, and learning about forex trading may seem like a daunting task. With all of the terms and concepts that are used to describe the market and its many facets,
it's easy to get overwhelmed. If you are looking to get started with trading in the forex market, then you should definitely try to do as much research as you can. This article will provide you with some of the most commonly used terms and concepts in forex trading. Before you make a forex account and start trading, you should have a good grasp of forex terminology and concepts. Here are some of the many terms and concepts that you are likely to come across while trading in the forex market:

THE EIGHT MAJORS
Basically, the eight majors are the eight currencies that account for a majority of  the trades in the forex market. These are the currencies from the Eurozone (EUR), United States (USD), Japan (JPY), Great Britain (GBP), Switzerland (CHF), Canada (CAD), Australia (AUD), and New Zealand (NZD).

CURRENCY PAIR- In the forex market, all of the currencies are paired together. For example, "EURUSD" refers to the currency pair of the euro and the US dollar. All of the pairs have a standard layout, with the base currency being the first of the two and the terms currency being the second of the two.

BASE CURRENCY - The base currency (the first currency in a currency pair) is the benchmark for the value or price of the currency pair. For example, if the currency pair quote is something like "EURUSD = 1.300," this means that a single euro is valued at 1.300 US dollars.

TERMS CURRENCY - Also called the "counter currency" or "quote currency," the terms currency is the second currency in the currency pair.

BID AND ASK - "Bid" is the buying price of the dealer, while "ask" is the selling price of the buyer. In order for the dealer to make money, the bid price is normally always lower than the ask price.

SPREAD - Spread is the difference between the bid price and the ask price. This value is always calculated by subtracting the ask price from the bid price (Bid - Ask = Spread).

LONG POSITION - Taking the long position, or "going long," means to buy the base currency in hopes that it will increase in value against the terms currency. For example, going long on the EURUSD, means that you buy EUR with your USD, in hopes that the EUR will appreciate in value.

SHORT POSITION - Taking the short position, or "going short," means to sell the terms currency in hopes that the terms currency will strengthen against the base currency. In other words, you are looking for the value of the currency pair to decrease, indicating that the terms currency is increasing in value. This list is by no means an exhaustive list of the terms and concepts that are used in the forex market. Still, the terms listed above are some of the most commonly used. They will give you an idea on how the market works, how the currencies are valued, and how you make trades.

THREE TYPES OF FOREX MARKET ANALYSIS
To begin, let’s look at three ways on how you would analyze and develop ideas to trade the market. There are three basic types of forex market analysis:
1. TECHNICAL ANALYSIS
2. FUNDAMENTAL ANALYSIS
3. SENTIMENT ANALYSIS
There has always been a constant debate as to which analysis is better, but to tell you the truth, you need to know all three.

TECHNICAL ANALYSIS
Technical analysis is the framework in which forex traders study price movement. The theory is that a person can look at historical price movements and determine the current trading conditions and potential price movement. The main evidence for using technical analysis is that, theoretically, all current market information is reflected in price. If price reflects all the information that is out there, then price action is all one would really need to make a trade.

FUNDAMENTAL ANALYSIS
Fundamental analysis is a way of looking at the forex market by analyzing economic, social, and political forces that may affect the supply and demand of an asset. If you think about it, this makes a whole lot of sense! Just like in your Economics 101 class, it is supply and demand that determines price, or in our case, the currency exchange rate.
Using supply and demand as an indicator of where price could be headed is easy. The hard part is analyzing all of the factors that affect supply and demand.

SENTIMENTAL ANALYSIS
With traders, the markets will not reflect all the information that is out there in the market because the traders will all act the same way in regards to the information. This is not how they do things. It is a bit tougher to get your hands on this information, and each trader is going to have their own opinion or even explanation of how and why the market does what it does. The market is, in all actuality, a network that is complex and made up of a number of individuals who want to spam any and all news feeds out into the open for others to see. The market is actually a place that represents all of the traders and what they feel for the market. The trader’s feelings and positions in the market are actually the sentiment of the market and what makes it go. If you have a strong feeling for the market, and you have something to say when you’re a trader, there are problems. You cannot make the market move to your favor. If you think that dollar is going to rise in the end, but other people do not think so, you cannot actually do anything about it. You have to take into consideration everything that the market stands for, and what they are going to believe in the end. Pretty much, the majority rules when it comes to trading. You have to keep in mind how the market is feeling at any given time. You have the choice on how you would like to incorporate the market’s feelings and sentiment into any trades that you make or the trading strategies that you use. You can ignore market sentiment, but it might not be for the best, in the end, depending on what type of trade you make. If you can gauge market sentiment, then it can become a seriously important aspect of all the trades that you decide to make. You can actually use this to your advantage.


Click to thte Download full forex tutorial