Currency Forex Market Trading

currency forex market tradingSwapping currencies on the foreign exchange currency market (FOREX) represents a nearly $5 trillion dollar per day activity. That is roughly 10 times the entire capitalization of the New Zealand stock exchange on a daily basis.

The staggering amounts of money involved and the millions of participants provide some substantial benefits for the individual or retail trader.

Trades in any of the world’s major currencies can be a executed essentially instantaneously. The difference between the desired price and the actual price at which an order is filled, known as slippage, is negligible, unlike some other types of investments where an order may languish for some time, giving prices an opportunity to change to an extent where the trade is no longer desirable.

Another benefit the huge trading volume presents is the fact that not even a large trading entity, such as a major government or powerful multinational bank, can exert an unfair influence on prices. There is always a balancing force in the form of another large trading entity, or a combination of traders, that will see a currency rising in price as an opportunity to sell that currency and push its price back down.

What follows is a brief primer on the FOREX market functions and how an individual trader can take part.

Business in the FOREX market is conducted by comparing the prices of two different currencies, known as a currency pair and speculating on the value of one currency versus the other.

For example, at the time of this writing the Aussie dollar is worth about 1.3 Kiwis. This pair is known by the symbol AUD/NZD. The Aussie is referred to as the main currency and the Kiwi is called the quote currency.

If traders decide that they think the Kiwi will gain in value compared to the Aussie, they sell the pair, known as going short or simply, shorting.

If, on the other hand, traders think that the Kiwi will decline compared to the Aussie, they buy the pair, known as going long.

There are over 200 different currencies that can be exchanged in this fashion. Most traders focus on only a few. The currencies of underdeveloped countries can be erratic and unpredictable. A good basis from which to begin is to concentrate on any pair that contains the Kiwi, the Aussie, the United States dollar, the euro, Swiss franc, Canadian dollar, the Japanese yen and the Great Britain pound.

Basic Requirements for Retail Forex Trading

1. Device for accessing the Internet
2. High speed Internet connection
3. FOREX broker
4. Forex trading software or platform
5. Money with which to trade

Specialized trading computers can run upwards of $10,000 with state-of-the-art technology and multiple monitors, but it is possible to start with any relatively up-to-date desktop or laptop. If you can’t trade on either of these, no amount of fancy technology will make any difference. Many applications are being developed to permit mobile trading using smart phones.

High-speed Internet connections should be the hardwired variety unless you have complete faith in your wireless connection. Satellite Internet, with its latency issue, will not do. A redundant method of accessing your price data provider is also desirable.

Finding a FOREX broker is the most important item on the list. All brokers offer free trials using simulated accounts. Don’t be shy about using these, don’t feel obligated because you do, and hold the potential broker’s feet to the fire. You’ll eventually be paying whichever broker you choose – make them earn it.

A FOREX trading platform can generally be had for free from the brokers. Test it to make sure it is compatible with your computer or smart phone. Make sure you like it – you may be spending considerable time with it.

The money used to fund your trading account must absolutely be money you can afford to lose. Even if, by some wild stretch of the imagination, you never have a losing trade, the probability is very high that at some point during a trade you will be losing money, known as a drawdown. If you’re trading with money you need to survive and honour obligations, you’ll make poor trading decisions. If you’re not willing to take the money you have designated for trading and set fire to it, don’t even think about using it for trading.


FOREX currency market trading can be profitable and enjoyable. It can definitely be risky. Give yourself adequate time to gain experience, and most importantly, learn the trading strategies and tactics that are most effective for you. For more information on Forex Market Trading or to begin trading contact today!

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