Forex Education: An Overview Of Basic Foreign Exchange Market Knowledge
The foreign exchange market or the currency market is the largest financial market in the world with trillions of dollars worth of transactions that occur every single day. It has to do with trading currency the way that you trade commodities, and all foreign exchange or forex transactions are conducted by trading in currency pairs.
The retail or over-the-counter forex market is the version of the market that most individual traders will be familiar with, and in 2010 the National Futures Association changed the laws regarding retail forex trading so that the maximum amount of leverage allowable is at a 50:1 ratio. With the standard lot size at $100,000 this means that it requires $2,000 worth of available funds in your trading account for every standard lot that you are trading.
Because the foreign exchange market is heavily regulated in the United States, you will find a large selection of forex brokers that are reliable and financially sound, and many of these companies create their own proprietary forex trading software for their clients. Depending on your personal requirements as a trader, you may want to use your forex broker's proprietary trading software or you may want to use a popular software that is supported by many different brokers such as Metatrader.
When it comes to your actual trading activity and the system that you are using to find trading opportunities, there are two main types of forex trading strategies and those are either fundamental or technical. A fundamental trading strategy focuses on the media and global politics, and trading decisions are based on economic data, economic reports, and political announcements. A technical trading strategy focuses directly on the price action and the price charts, and trading decisions can be made using a number of different mathematical indicators directly on the currency pair's price chart.
Both of these types of trading strategies may appeal to different traders and have different benefits associated with them. For example, a fundamental trading strategy that is based largely on current political conditions may be a long-term trading strategy where open positions are held for longer than a week, whereas most technical trading systems tend to be short-term with positions held open for 24 hours or less.
One of the key benefits of trading the forex market using technical analysis is that your trading system can be automated and programmed into a computer algorithm that your trading platform can execute automatically. Regardless of your specific preference regarding forex trading, it is important that you receive the right forex education before risking any of your own money in live market trading conditions.
The retail or over-the-counter forex market is the version of the market that most individual traders will be familiar with, and in 2010 the National Futures Association changed the laws regarding retail forex trading so that the maximum amount of leverage allowable is at a 50:1 ratio. With the standard lot size at $100,000 this means that it requires $2,000 worth of available funds in your trading account for every standard lot that you are trading.
Because the foreign exchange market is heavily regulated in the United States, you will find a large selection of forex brokers that are reliable and financially sound, and many of these companies create their own proprietary forex trading software for their clients. Depending on your personal requirements as a trader, you may want to use your forex broker's proprietary trading software or you may want to use a popular software that is supported by many different brokers such as Metatrader.
When it comes to your actual trading activity and the system that you are using to find trading opportunities, there are two main types of forex trading strategies and those are either fundamental or technical. A fundamental trading strategy focuses on the media and global politics, and trading decisions are based on economic data, economic reports, and political announcements. A technical trading strategy focuses directly on the price action and the price charts, and trading decisions can be made using a number of different mathematical indicators directly on the currency pair's price chart.
Both of these types of trading strategies may appeal to different traders and have different benefits associated with them. For example, a fundamental trading strategy that is based largely on current political conditions may be a long-term trading strategy where open positions are held for longer than a week, whereas most technical trading systems tend to be short-term with positions held open for 24 hours or less.
One of the key benefits of trading the forex market using technical analysis is that your trading system can be automated and programmed into a computer algorithm that your trading platform can execute automatically. Regardless of your specific preference regarding forex trading, it is important that you receive the right forex education before risking any of your own money in live market trading conditions.