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Forex Trading and the Foreign Currency Exchange Business

By Andrew Daigle

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Published: 26Oct2006
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Forex trading is one of the most exiting businesses I've ever been involved with. Forex is the business of trading one currency for another. Business today is truly international and trillions of dollars each day are converted from one currency to another. The best thing about this foreign currency exchange business is that you don't care whether a currency is going up in value or down. You can trade currencies in either direction. When you think a currency will go down, you sell or short that currency. If you think that currency will increase in value, you buy or go long that currency.

When trading currencies in the Forex market, you trade currency pairs. For example, if you choose to trade the Euro and US dollar pair (EUR/USD), you are betting one of those currencies will go up in value while the other goes down. If you're on the right side of the trade, you make money. If you're on the wrong side of the trade, you lose money. To be successful in this business, you need a good money management system. You need to let your profits run and cut your losses short. Without proper money management, Forex traders will lose their money fast.

There are two sides to Forex trading you need to know before you get started. You need to understand the Fundamental and Technical side to Forex trading. Fundamentals are news events that move the financial markets. For example, when a country raises its interest rates, that would increase the value of that currency. If a country has higher imports vs. exports, that could hurt the value of that countries currency. There are many things to consider when it comes to fundamental trading.

The other side of trading the Forex market relates to technical trading. Technicals are when you use tools like reading charts and chart patterns. Using Fibonacci studies to determine technical retracements. There are many other tools a forex trader could use as well, such as MACD, or Stochastics, trendlines etc. There are at least 20 different indicators a Forex trader could use but the most successful traders keep it simple when it comes to technical tools. More is not always better. When I trade, all I look at are moving averages and price movement. That's all I need and I consider myself a successful trader.

As you read more about this business, you'll find so many strategies people use to trade the Forex market. There are thousands of Forex strategies out there and they grow by the day. One Forex trading strategy might work for one person and it could fail for another. The trick in this business is to find the best Forex trading strategy that works for you and stick with it. Don't jump from one strategy to another without giving each one enough time to prove itself. Be patient and you will quickly find yourself getting better and better at this business.

You need to do your homework before you get started in this Forex trade. Read all you can before jumping in. When you think you have a good understanding of how it works, you should begin by paper trading. That's when you keep a Forex trading journal of trades you would take and follow them through. When you're satisfied with your success rate, then you can open up a free Forex demo trading account. This is when a Forex broker gives you access to a real Forex trading platform but you use fake money to make trades. You place trades as you would normally but you are using play money. You can demo trade for as long as you like. When your success rate is acceptable to you and you want to start trading real money, then open a live trading account and start trading. I suggest you start with a minilot account and start small at first. You will find that when you're trading real money, your brain thinks differently than with fake money.

That's about it when it comes to learning the Forex trading business. This has been one of the best businesses I've been involved with and expect to be doing this for many years to come. This business is not for everyone, but if you find it is something you enjoy and make money with, there's no better feeling than making a living sitting at your computer a few hours each day and having the rest of the day to do whatever you want.

Andrew Daigle is the owner, creator and author of many successful websites including ForexBoost, a Free Forex Training Resource for the Novice and Advanced Forex trader.

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