[simple_series title=”Forex Beginners”]
This is the best part. Who would resist earning big with small investment? Yet, no one should think that there is an instant success in everything. So, foreign exchange trading is not an exception. There are steps and lessons that every trader should follow carefully so that he or she can get enough knowledge for live trading.
Now, let’s go on to the next lesson in which a trader has to use essential analysis in deciding whether he or she has to buy or sell certain pairs of currencies. Be ready and keep your eyes open. Hopefully, this is not a boring class like what you experienced on your days on high school. We will do our best in covering only the basic and essentials points to avoid boredom for all successful traders like you.
Selling activity means that a trader is selling base currency, then buying quote currency in which he or she expects to find out the base currency is falling in value. Then, the trader can buy it back, definitely with much lower price.
There are two prices for forex quotes. They are bid and ask. Most often the bid amount is lower as compared to that of the ask amount.
Bid is regarded as the price that a broker wants to buy the base currency so that he can exchange it with the quote currency. We can say that the bid is should be the best price available that the trader can sell to the trading market.
Ask—commonly known as an offer price—is regarded the price that a broker wants to sell the base currency for the exchange into quote currency. We can say that the ask should be the best price available that the trader can buy from the trading market.
The spread is the difference between the price of bid and the ask.
Common Exchange Currencies
Most experienced traders will perform the buy of EUR/USD when they are sure that the economic condition of the United States is weakening. In this case, Euro is the base currency so it becomes the basis for buying or selling. Traders who buy Euros expect that this currency is going to rise against the USD.
On the other hand, traders will sell EUR/USD when there is stable or strengthening economic condition of the United States. It means, traders will sell Euros as they expect that they fall against the USD.
The same theories will apply to all exchange currencies when traders really have to pay attention on the latest news about each country’s economic condition.
Forex Trading ≠ Instant Rich Scheme
So far, you might have come into conclusion that foreign exchange trading is not too complicated to deal with. As such opinions are true, it does not mean that forex trading is your main vehicle to get instant wealth. Again and again, forex trading requires a skill in which all traders should take time to understand comprehensively.
Actually, the same thing applies to almost any kind of occupation in which there is no instant success on everything. If everyone trades forex, it means that there are millions of millionaires in this world. There are some times when traders—even the experienced ones—can suffer from losses.