Forex Signals

How Forex Currency Trading Works

Currency trading has its benefits over the stock market. The Forex market is a continuously traded market five days a week. You don’t have to worry about gap openings except if you hold a position over the weekend. A day trading rule does not exist in the Forex market. In the Forex market you can make more than one trade in a day without having 25K equity in your account. Leverage is much better at 200 to 1 or higher buy you don’t want to use more than 10 to 1 when first starting out. There aren’t any restrictions on short selling, since currency trading has an interconnection between buying one currency and selling another, a currency trader has equal ability to trade in a rising market as in a falling one. There aren’t any commissions or stock exchange fees to pay. There is very little cross-border regulation and very little insider trading, however, the large banks do have an important advantage; they can see their customers’ order flow and act on it before you.

Currencies are traded against one another in an inverse relationship. Yet each currency pair is an individual product. For example, EUR/USD is the price of the Euro expressed in U.S. Dollars. One Euro = 1.5885 U.S. Dollars. Out of convention, the first currency in the pair, the base currency was the stronger currency at the creation of the pair. The second currency is called the counter currency and was the weaker currency at the creation of the pair.

Below are the nicknames for most of the currency pairs:

• AUD / USD — Aussie
• EUR / USD — Euro – most heavily traded currency pair
• GBP / JPY — Geppy
• GBP/USD — Pound Dollar or Cable – most heavily traded
• NZD / USD — Kiwi
• USD / CAD — Loonie
• USD / CHF –– Dollar Swiss or Swissy

Finding a trade opportunity in the stock market is difficult because you have to search through accounting information on thousands of stocks. The Forex trader has only six major currencies pairs to research: the EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD AND USD/CAD. They consist of 80% of total Forex trading volume.

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