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Main » Articles » Currency trading

How to Make Money With Currency Trading

In order for you to start to make money with currency trading, you first have to understand the terms used. FOREX or Foreign Exchange is used in reference to the international currency exchange market. Value of currency is traded against the other for a profit. The FOREX market was established around the 1970's, and this was when the floating currencies and free exchange rates were conceptualized in the market. Only participating agencies in the market could determine the value of a certain currency against the other, which is calculated from supply and demand of that particular currency.

This market is quite unique in the sense that it is a market that is free from external controls, like government or a ruling body. It is totality independent from manipulation. It is the most liquid financial market, having trades worth of one to one and a half trillion US dollars per day. With a volume this big, this is the reason why no single entity or group can consolidate enough resources to significantly affect a single major currency. Add to this the fact that traders are allowed flexibility and can make a dealing in a snap, unlike a rarely traded commodity. This is largely due to its liquid state.

Reasons for people entering the money market may be due to their interests in hedge investments. These are complex marketing strategies created to produce higher returns when the market is down but may also produce lower returns when the market is bullish. Others perhaps use a combined form of funds to make small and immediate returns. Unlike prized blue chip stocks that require a long-term need to fully appreciate returns, the constant fluctuations give rise to an environment that proliferates a complexity of strategies to be employed.

Foreign currency trading is not centralized in a certain area; this all takes place over open communication lines all around the world and is open 24 hours per day. From all different time zones, traders will haggle over price points for the major currencies. It is possible and a common practice for investors to get a credit line to back them up when they try to speculate for the prices of currency. This move is called marginal trading, and it multiplies your gains and losses by using this strategy.

There are two main strategies that are employed when investing in FOREX markets. These are technical analysis, which is used by small and medium players, and fundamental analysis, which analyzes currency and situations of particular countries. The latter calls for a thorough look at economic factors and political stability.

Bear in mind that a good understanding of the market will allow you to become successful in determining profitability. These are just some techniques to make money with currency trading.

Category: Currency trading | Added by: forex-market (2009-05-15)
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