Learn to Trade Forex – What is The Basic Knowledge?

Learn to Trade Forex – What is The Basic Knowledge?

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The sheer size of the forex market is pretty daunting, not to mention all kinds of a term that comes with it. Therefore, this is one thing that makes novice traders feel a little bit afraid to step into the market. The market seems very complex, yet people can learn to trade forex by understanding the basic of it, which will prepare them to be a better trader.

Learn to Trade Forex- The Basic

Before you learn to trade forex you need to know the basic forex trading. This basic knowledge will help you to understand the concept of trading forex in the forex market.

And also this basic knowledge will be the foundation for your stage of becoming a successful trader.

Forex Trading

Basically, Forex trading is a market where foreign currency becomes the main subject that was trade all the time.

Trading is usually done through a broker, where the main task of the broker is to take an order to an exchange and attempts to execute it as they were instructed to do.

Major Foreign Currency

In the forex market, a trader can make a transaction for foreign currency from any country all around the world.

But beginner traders may start it with a major foreign currency that takes most of the market. While you learn to trade forex, you have to know about this currency.

These major foreign currencies come from 8 countries including United States, United Kingdom, Switzerland, Canada, Australia, New Zealand, Japan and Eurozone country especially France, German, Italy and Spain.

These eight countries make up the majority of trade in the forex market, thus it can help the trader to earn the profit they want by focusing on these countries.

Each country released its economic data on regular basis, where this data can be used to analyze the economic situation of the country and how it affects the currency price.

If it translated into a pair of currency, then there are the four major pair that takes most of the market and they are:

  • EUR/USD or Euro and Dollar
  • USD/JPS or Dollar and Japanese Yen
  • USD/CFH or Dollar and Swiss Franc
  • GBP/USD or British Pound and Dollar

The additional pair includes three commodity pairs and they are:

  • USD/CAD (dollar/Canadian dollar)
  • AUD/USD (Australian dollar/dollar)
  • NZD/USD (New Zealand dollar/dollar).

The Difference between the Forex Market and other Trading Market

One of the biggest differences between the forex market and other trading markets such as stock and options trading is the fact that no governance body arranges the whole matter.

All members or traders will trade with each other based on the credit agreement. This is also possibly the biggest, largest and most liquid market all around the world.

The transaction happens 24 hours a day and it rarely has huge gaps in price. It also has a huge scope, where it covers basically all around the world and it is accessible from anywhere.

Carry Trade

In the forex market, carry is the most popular type of trade that was done by a large hedge fund and also a small retailer fund.

Basically, the main idea of carrying trade is based on the fact that every currency has an interest rate. And the best way to use that is to pair up the currency with a high-interest rate against a currency with a lower rate.

And also make sure that spreads keep expanding the right way.

Learn to Trade Forex – Final Thought

There are many aspects that need to be covered by those who want to learn to trade forex. The most important thing is to keep learning and start practicing it in order to be a better trader in the future.