How to get to grips with the fast-paced forex market

Julie Brownlee, Fsp Invest, 25 Feb. 2014

Tags: forex, forex market, forex trading, trading forex, stock markets, currency pairs, how the forex markets work, trading, currencies, market,



Starting to trade forex can be a daunting experience. It can take a little while to get to grips with how and why the markets move. But there are some simple connections that new forex traders can overlook. By knowing and understanding them, your trading could benefit. Read on to uncover what these are…



Electronic trading had a huge effect on financial markets across the world, Richard Hill in Forex Round-Up explains…

Instead of financial markets working separately, electronic trading meant they could work like one huge linked market.

This means that there is usually a link between what’s happening in other financial markets and the price movements in currency pairs

To demonstrate this, let’s look at the link between all the US dollar pair currencies.

When the US dollar increases in value, the price also tends to increase against all the other currencies. So when you’re starting out, it’s a good idea to only trade one US dollar currency pair at a time.

So it wouldn’t make sense to short the pound by the dollar and at the same time, short the Australian dollar by the dollar. That’s because these pairs are denominated in US dollars. And if the US dollar increases, the pound and Aussie dollar would normally both fall in value.

By taking on more than one US dollar currency pair, you’re increasing your risk. If the dollar moves against you, both of your trades could lose.

Watch the stock markets

There is also a strong link between forex price movements and the world’s stock markets. By knowing what’s going on in the markets, it can help your forex trading.

And that’s partly down to the fact that many huge forex trades take place to convert funds in and out of the world’s stock markets.

For instance, if a country’s stock market is rising, often that country’s currency will rise in value. And the opposite is true.

There are some other links to look for…

If global markets are on the rise, the US dollar tends to drop. And if global markets start to fall, the US dollar will rise. This is because investors will start to run, dump their shares and convert their proceeds back to US dollars.

Of course, this is a very simplistic view, but it gives you an insight into the workings of the forex market.

So there you have it, how to get to grips with the fast-paced forex market.


Related QA

Pic
BombazInt asked:
Hi Timon..Are you familiar with this broker called CM Trading??.Whats your take on their trustwortiness??Also compared to other brokers which broker [read more]
Published at 06 Dec. 2017 in: Forex Forex trading 1 Answer
Pic
barbaramagwaza5 asked:
1.Good Morning Timon, I would like to know if I have ordered a book like Forex 101 etc, does it get physically delivered to me or? 2. When I have [read more]
Published at 06 Nov. 2017 in: Forex Barbaramagwaza5 1 Answer
Pic
pearlyhabib asked:
Hi Timon, I registered for the Webinar held on 30 September 2017 - How to turn R10,000 into R87,400 in just two hours. When i tried to access the [read more]
Published at 04 Oct. 2017 in: Forex Trading webinar 1 Answer
Pic
rakhabeletsi asked:
I have 1 year loosing money i cant seem to be making progress on this forex thing and investing on penny stocks so i believe if i could have a mentor [read more]
Published at 03 Oct. 2017 in: Forex Wealth creation 1 Answer
Pic
henry.bc asked:
I subscribe to GT247 and Easy Equities but what charting platform would you recommend to do or track the profit patterns on? [read more]
Published at 30 Sep. 2017 in: Forex 2 answers

Related articles:


Latest:

Comments
0 comments



 
 


Youtube Twitter Facebook

Connect with us:    

POPULAR TOPICS
  • Accelerated Investor
  • Accessories
  • Accountancy
  • Accountancy services