Forex Trading

WHAT IS FOREX TRADING

The Foreign Exchange, also referred to as the "Forex" or "Spot FX" market ,Forex trading is the largest financial market in the world, with over $1.2 trillion changing hands every single day. If you compare that to the $25 billion a day volume that the New York Stock Exchange trades, you see how giant the Forex Trading really is. In fact it is three times larger than all of the US Equity and Treasury markets combined! What is traded on the Foreign Exchange? The answer is money. Do you want to join forex trading ?

Forex trading is where the currency of one nation is traded for that of another. Therefore, Forex trading is always traded in pairs. The most commonly traded currency pairs are traded against the US Dollar (USD). They are called ‘the Majors'. The major currency pairs are the Euro Dollar (EUR/USD); the British Pound (GBP/USD); the Japanese Yen (USD/JPY); and the Swiss Franc (USD/CHF).The notable ‘commodity’ currency pairs that trade are the Canadian Dollar (USD/CAD) and the Australian Dollar AUD/USD. Because there is not a central exchange for the Forex trading market, these pairs and their crosses are traded over the telephone and online through a global network of banks, multinational corporations, importers and exporters, brokers and currency traders.

Traditionally, currency Forex trading has been a 'professionals only' market available exclusively to banks and large institutions, however, because of the rise of the new E-economy, online Forex trading firms are now able to offer forex trading accounts to 'retail' traders like you and I. Now almost anyone with a computer and an Internet connection can trade currencies just like the world's largest banks do. There are now over 6 million forex trading accounts worldwide up from 1.7 million in 1997

1. Market orders. A market order is an order to enter/exit forex for forex trading (buy/sell) at the market price (that is, at whatever the market price is at the time of execution). This type of order can incur slippage.2. Limit orders. A limit order forex s an order placed to alter or exit the market at the exact price placed (or better) with no slippage.3. Stop orders. A stop order in forex is an order to enter/exit the market at an exact price. The stop order turns into a market order when reached and can therefore incur slippage.Forex trading there are two ways to execute an order. The first is called one cancels the other (OCO). When either the limit order or the stop forex order is reached it cancels the other. In other words, if you have entered a long position (bought) and your limit order is reached you will automatically sell to protect your profits. By reaching your limit order, you have canceled your stop order (which you set up at a lower price than the entry price in order to minimize losses).

The other type of order execution procedure is called cancel/replace. If you are chasing the forex market you will be using the cancel/replace execution procedure. As the forex market continues to move your original stop order is cancelled and replaced in the direction of the forex market movement. In this way you are locking in your profits as you go. If you are a bull, only cancel and replace to the new last low after the market has made a new high. If you cancel and replace before the forex market has made a new high, you may be stopped out by a slight retracement. If you are a bear, only cancel and replace to the new last high after the forex market has made a new low. Otherwise, you may be stopped out by a slight retracement (the market swings in the opposite direction of the trend but does not break the trend).As you're looking at your charts, you should know that you are not seeing the entire picture - not all participants in the Forex trading market are watching the same price. The difference is that buyers are watching the ask price - because that is the price they ask, and sellers are watching the bid price - because that is the price they bid. Most charts are bid charts, meaning they display the bid price (the candle charts you will be looking at are bid charts). The ask price is typically 3-10 pips higher than the bid price (depending on the currency you're forex trading). The difference between the ask price and the bid price is called the spread. Some currencies have spreads as large as 100 pips; don't trade these currencies!

In forex trading Whether you are a bear or a bull, you will be selling on the bid and buying on the ask. When you set a profit limit to sell you will be selling on the bid, as you will when you set a protective stop to sell When you set a profit limit to buy you will be buying on the ask, as you will when you set a protective stop to buy. Remember, in any case you will buy on the ask and sell on the bid. Keep this in mind, as you may need to adjust for it when you're setting your stop loss orders (more about that later).