How to Get Started Trading Currencies

Learning the basics of how the Forex market works is how to get started trading currencies. The major Forex markets are London, New York and Tokyo. This allows traders to trade currencies virtually around the clock on every business day. In addition there is after hours trading to fill in the gaps. Roughly seven trillion dollars’ worth of currencies are traded on every business day. The major currencies pairs are these:

  • US Dollar, USD
  • Euro, EUR
  • British Pound, GBP
  • Yen, YEN
  • Swiss franc, CHF
  • Canadian Dollar, CAD
  • Australian Dollar, AUD

Other important currencies include the following:

  • Chinese Yuan
  • Russian Ruble
  • Indian Rupee
  • Brazilian Real
  • South African Rand
  • Taiwan Dollar
  • South Korean Won
  • Singapore Dollar
  • Swedish Kroner

There are two reasons to trade currencies. One is to convert your currency into another in order to pay for something that you are buying. The other is simply to speculate on the value of various currency pairs in search of a profit.

Currencies Trade in Pairs

The point of the Forex markets is to facilitate international trade. Thus one currency is used to buy another.  The market is different from the stock market because you can make purchases either way. (Think of buying $10,000 worth of IBM or think of buying $10,000 and paying the necessary number of shares of IBM stock.)

The Relative Values of Currencies

The eventual value of a currency versus another is based on two sets of fundamentals. These are:

  • The strength of one economy versus another
  • Balance of trade
  • Employment or unemployment situation
  • Currency and gold reserves
  • Central bank monetary policies
  • Policies and social issues with the two nations

However, the market anticipates these fundamentals and market sentiment varies from optimistic to pessimistic and back in minutes. This is where traders take advantage of the technical analysis of Forex currencies. Approaches as simple as Forex charting with Candlesticks give traders an easy to understand view of market movement and clues as to where prices are going next.

How Do I Get Started Trading Currencies?

You will trade currencies online. So, you will need a reliable and high speed computer connection capable of uploading and downloading huge quantities of data. You will need an account with a broker and trading software that is compatible with the platform that he uses. You will need a powerful and fast trade station that allows you to track second by second changes in the market. Then you will need to learn, ideally from a trading coach, and practice in simulation. Your trade station software will include market history. This will allow you to trade a currency pair as though you were trading live. This will allow you to make your most glaring mistakes without losing money. Then you will be able to follow trades with your coach and even make those trades yourself in slower markets. Along the way you will learn how to manage your trading capital, never putting all of your capital into any one trade. You will learn to check the Forex news and apply what you learn in up to the minute Forex trading. And, you will learn to audit your trading results and change your approach as necessary to improve your results.