forex

1. Forex Market Fundamentals
   The Forex Market is characterized by its inability to be confined within the limits of one central exchange structure or a specific physical location. Rather, it engages in two-dimensional operations in dispersed regions of the world through electronic means, over-the-counter trading (OTC) in a variety of banks, brokerage firms, and often one’s own private deals. The majority Forex brokerage services are offered in the following geographical regions:

London: The foremost trading center with approximately 34% of the trading volume worldwide.
New York: The next center in size which ranks for about 16% of the overall trading volume.
Tokyo and Spek Sydney: These areas help to create the fifteen hours activity of Forex trading since there is always a zone where trading is open.
There are different aspects associated with each trading session.

London Session: High liquidity in this period leads to large price ranges achieved and this period also tends falls in heaven between the two opposing behavioral sessions, the Tokyo and the New York creating outrageous volatility of this period.
New York Session: This consists of many trends, especially when it is the overlap of London and New York. It is also a time when the US economic statistics are released.
Tokyo Session: More of an easy-going and accepted phase whereby price changes are less pronounced. Most suitable for trading JPY pairs and other currencies from the Continent.

2. Prime Currency Trading Poles
   The Forex platform is pivoted on primary currency pairs which have the highest volume of trades and liquidity. The pairs under transactions always include the U.S dollar in any of the orders:

EUR/USD: Euro belongs to United States Dollar. This is the most liquid and easiest to operate currency pair with lowest room spreads.
GBP/USD: British Pound competes against the U.S. dollar. Has an inclination to be volatile because of the UK’S economy and political risks.
USD/JPY: The Dollar is the currency of Japan U.S. section. It is a highly traded currency pair with a reasonable amount of liquidity.
USD/CHF: The United States of America’s currency and Swiss prevent franc. The Swiss National Bank has a history of being a safe haven currency.
Apart from the majors, there exist cross pairs (these are currency pairs that do not feature the US dollar e.g. EUR/GBP) and exotic pairs (a major currency is paired with a currency dubbed exotic).

3. Professional Trading Techniques in Forex
   Let’s take a look at some complex methods which the traders apply in order to benefit from the market to the maximum:

Scalping
Scalping entails making a lot of transactions in a single day to make little profits on a number of price changes and it is therefore a fast strategy that allows the traders to hold any position for a few seconds or minutes and not longer.

Advantages: Excellent profit reward to risk ratio.
Disadvantages: Impossible to withdraw attention due to the need for speed and decisiveness, and the high cost of making frequent trades because of the many transactions.

This means that a day trader buy the shares in a particular stock and sells them at the end of the day without holding the shares overnight into the following trading day. Their main objective is to take advantage of the price movement that occurs in day trading without exposing their trades overnight to carry
the following day.

Pros: Risk of overnight position not available. A number of trades can be made in one
day.

Cons: Danger lies in the high volatility that is atypical most periods; it Is time and attention consuming.
In swing trading, traders have to know when to stay in the market and when to exit and position themselves to profit in a few days or weeks in the market. This mediumm term trading seek turining price shifts towards capturing volume making use of both techniques of fundamental analysis eos and technical analysis rogi.

Swing trading has its advantages and disadvantages.0597),
Cons. Overnight Risk; the positions are likely to be hurt by news or even gaps in the markets.
Long-term strategies Position trading is the most common in the position trading strategy that traders only open trades for weeks or months. As for the deep fundamentals, a keen study is required concerning the econometric data and its recent activities, monetary policies, and any political occurrences around the world.

Feedback on business risks for capital ventures: allows for excess returns by following trends over long – periods. Less time in the market is also mandatory.
Risks: there is an a priori condition that warns an encumbrance to the utilization of displaced issued capital; there are opportunity costs caused by the long holding period.

4. Technical Analysis in Forex
   Technical Analysis is greatly considered by most Forex traders since it involves making use of price charts in predicting future price movement. Some of the important tools include:

a) Support and Resistance Levels
Support is the price level at which the demand is so significant that prevents further decline above this price level.
Resistance is the price above which selling pressure is so great that further increases in price cannot be sustained. Traders/watch for price bounces of these levels or breaks of these levels to indicate buy or sell opportunities respectively.
b) Moving Averages (MA)
Moving average smoothens price data in order to get clearer picture of the trend. In the Simple Moving Average, computation involves taking the average of given number of price points in a given time period while the Exponential Moving Average assumes that recent prices are more significant, thus more weight is given to current prices. As a strategy, traders will use MA crossovers as signals. A good example is when the short-term MA crosses above the long-term MA, which may suggest an opportunity to purchase.
c) Relative Strength Index (RSI)
The relative strength index is a type of indicator used in analyzing how fast and the extent of which price changes. The scale ranges from 0 to 100 where values exceeding seventy imply the market is overbought (wait for selling signals) and values below thirty imply the market is oversold (wait for buying signs).
d.) Fibonacci Retracement
This is one of the most popular method of determining the extent of correction in the trend of a currency price after a particular price movement has taken place.

Moreover, this tool helps to identify possible reversal levels in the market by looking into the extent of a price movement and some Fibonacci ratios (38.2%, 50%, 61.8%) of the price movement. These levels are put in place at where the price is expected to retrace before resuming back to the trend.

5. Fundamental Analysis in Forex

Fundamental analysis is the evaluation of a currency by considering the economic social and political factors that determine the price of a currency. Such factors are as follows:

Interest Rates: Central banks such as the U.S. Federal Reserve employ interest rates as one of the tools for regulating inflation as well as promoting growth in the economy. This has the effect of attracting more capital from foreign countries which in turn has the effect of appreciating the currency.

Inflation: Currencies of nations with lower inflation rates tend to increase in value. Inflation in moderate levelsis helpful as it attracts investments leading to increase in the currency in circulation.

Employment data: More jobs usually means more people who can spend money which usually helps strengthen the economy hence appreciation of the currency in the international markets. Examples of these are the U.S. Non-Farm Payrolls (NFP) report.

Gross Domestic Product (GDP): Growth in GDP represents the prosperity within an economy. Steady economic growth as shown by high development in GDP signifies a supportive monetary policy and a strong currency.

Geopolitical events: These are even factors that affect currency prices. Such unfortunate events include political tensions, wars and even general elections among other factors. Safe currencies such as the Swiss Franc (CHF) and Japanese Yen (JPY) in most instances get stronger when there is crisis.

6. Risk Management in Forex

And a risk management program is also very important for a trader for Forex success over time. Here is a collection of important ones:

Position Sizing: Always make sure that you only risk a small percentage of your capital on any one trade. Many traders will implement a 1% rule or 2% rule, meaning they will only put at risk 1-2% of their overall equity on one trade.

Stop-Loss Orders: A stop loss order is a risk management tool employed in forex trading whereby the trader instructs his broker to close a position at a particular value in order to limit potential losses.

Take-Profit Orders: Target order is given to the broker to close a certain position once a given level of profit is attained.

Risk/Reward: Risk and reward are two sides of the same coin so always obtain a positive risk/reward ratio. For instance, assuming you are willing to risk 50 pips then you

7. Selecting a Forex Broker

In the process of selecting a broker, you should keep the following in mind:

Regulation: Check the existence of appropriate regulation from well-known authorities like FCA (UK), ASIC (Australia), CFTC (USA) for your chosen broker.
Leverage Options: Know how much leverage they offer for your trading and if it caters for your particular trading style.
Spreads and Commissions: Find brokers who have a professional attitude and provide reasonable spreads and commissions to reduce the costs.
Trading Platform: Confirm that the tools you are looking for such as Metrader 4 or 5 come in a simple easy to use platform.
forex trading is also very rewarding to those who are knowledgeable about it and exercise discipline and risk management when necessary. Nevertheless, it is advisable to begin by going small, practicing with a demo account and working on your trading skills.