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  • Beginners Guide to Forex Trading

    Forex is an acronym for the currency market. Forex is mainly an international currency market where currencies from around the world buy and sell for profit. The market began in the 1970s. Forex is unique in the market because it is not based on any particular location, and also has very little qualification to invest. Forex is also without external controls, and investors (market participants) largely determine how much the currency costs depending on demand.

    Almost everyone can invest in Forex, and there are certain strategies for investors who want long-term benefits and strategies for investors who want short-term profits. A huge number of investors make Forex completely unique in the financial community. Forex development does not stand in one place as the NYSE. Specific time frame for Forex trading 24 hours a day from Sunday to Friday. Conversion operations can take place at almost any time, anywhere, around the world. There are Forex-dealers on almost all time zones, and it won’t be hard to find them.

    Many dealers can be found online. All an investor needs to do is decide in what currency he or she wants to start an account and then make a purchase. Many investors open an account using a credit line (they have no money). It’s called risky trading.

    What Is Margin Trading?

    Margin trading is a term used to trade borrowed capital. Conversion investments can be made virtually without money. All an investor has to do is make money on a certain currency. The investor chooses a currency that will increase in value quite quickly. After the currency increases, the investor gets the money back, which he has invested making tangible profits. These are high-risk investments, but revenues are large (as in most high-risk investments).

    Market Analysis

    Like Forex analysts and Forex traders often have to analyze the market. Like all other investments, Forex assumes a certain amount of calculated risk. There are two ways to calculate these risks, technical analysis and fundamental analysis. The technical analysis is based on the idea that the trend will continue thanks to historical analysis. Forex investor will notice that a certain currency is very strong and seems to be growing at a confident rate. The same investor may also assume that the currency will not decline in price, and will continue to grow as it has done in the past. The investor then buys a large amount of this currency and expects to make a profit. This entails investing with great assumption, but is relatively safe. Fundamental analysis is an analysis of the situation of the whole country. Investors using this method look at the situation in the country where the currency is located.

    Influence On The Market

    Factors such as the country’s economic status, political status and global status are mainly taken into account. For example, the Investor of Fundamental Analysis will not invest in the currency of the country that recently overthrown its leader and is in political decline. Although it seems like a logical investment, but it is not taken into account as one of the main elements of Forex trading. Foreign exchange values are largely determined by investors. This, as they say, involves fundamental analysis, which other traders see and monitor the situation of the country in the same way and react accordingly.

    Understanding Market Moments

    In order to create a functioning system in the Forex market, it is necessary to go through many tests. The system which is based on logical elements of the technical analysis (the analysis of directly price fluctuations and levels of a probable imbalance) and the correct strategy of risk management has to earn as a result (it is necessary to consider also a human factor). The key elements of most trading systems without which successful trading is unthinkable will be described below.

    Any trading system dealing with trading directly several ideas relies on the law of correlation. Correlation is the law of the relationship between two or more objects of the study (in our case these are charts of currency pairs). There is a forward and reverse correlation relationship. A direct correlation is a case where two charts are unidirectional and almost repeat each other, but if they are antidirectional, this is called shaped correlation.

    What Is Correlation?

    The correlation law is successfully applied in the valuation of strong and weak currencies in the Forex market also in the analysis of indices. A simple example is the USD index and its relationship with EUR/USD (if the index confirms the technical signal that appeared on the EUR/USD chart, it can be considered a priority speculative idea (the speculative portfolio should consist of priority ideas)). It should be noted that priority is given to the idea depending on the technical picture (in the above example USD index strengthens the technical picture EUR/USD (assigns it a score)). Trend, strong level, good macroeconomic expectations, confirmation of indices correlated with idea, are criteria by which priority is given to a particular currency pair.

    What Is Volatility?

    In order to understand the technical picture, the trader will also need to understand volatility in the moment and in the future. By analyzing price fluctuations, we highlight price and wave patterns, and one of these patterns is the magnitude of price fluctuations by which a trader can calculate profit potential and trade risk at the current market moment.

    Volatility can be extremely high when the price makes relatively large movements in seconds, and extremely low (no movement and accordingly no market potential). The best market moment is volatility with an average historical value (a calm market when you can quietly form a position with the optimal level of risk). But what happens when volatility has increased dramatically? The best way in this case is to buy this volatility (especially relevant when buying volatility on a trend). The case where volatility is bought out is extremely risky, but as the technical analysis says: «The trend is very likely to continue than will turn».