Forex

Forex trading is the buying and selling of currency pairs. Trading in forex exchange is always done in pairs. In simple terms a trader bets on the rise or fall of one currency against another. If a trader bets that the euro will rise against the dollar and places a trade accordingly then a profit is made. If the euro falls against the dollar the trader will lose his principal to some extent.

In the currency pair EUR/USD the EUR is the base currency and USD is the Counter currency or the Base currency. The exchange rate specifies how much of Counter currency must be paid in order to buy 1 unit of the Base currency.

When trading in forex, the trader must place a certain amount of margin with the broker to facilitate trade. While trading, the trader can leverage the margin upto “X” times and book the trade. The “Spot Market” or daily trading is adopted by most traders to place their trades. Forex trading has now become popular with many online Forex trading systems becoming operational. These forex trading systems are “real-time” and enable the trader to place trades without having to wait for the broker.

Before placing any trade a trader should do a technical analysis and a fundamental analysis of the currency pair. A technical analysis is analyzing the currency charts like Bollinger Bands, Support/Resistance and Hikkake Pattern. Fundamental analysis relates to political, economic and any other broad factors that may affect the currency pair. With a trade life-cycle as short as seconds or a few minutes forex trading is a good investment avenue to generate quick returns.