As I mentioned in my previous post, if you know how to put the stats in your favor, you are on your path to make money trading Forex. PLease, read carefully the following as this is crucial to succeed.

You have now become somewhat familiar with how the stock market works, and you understand to a point what is involved in trading on the Foreign Exchange Market.  Now, you would like to know how to gauge market trends in order to profit from your business ventures on the open market.  We are no longer discussing penny stocks and playground games.  You want the real goods.

The name of the game is statistics, and the first rule is that you must be aware there is no such thing as a sure thing on the stock market.  While you can never be 100% sure at any given time of the next move that will be made on the market as a whole, being able to read statistics and interpret them will place you ahead of the pack in regards to “guessing” what will happen next.

Some people compare investing with gambling, anjd I don't blame them.  If you can keep track of the cards that have already been played, you are more informed, statistically, regarding what is likely to be dealt next, meaning you can place a bet with greater insight than someone who has no clue what has already been played.  With the open market, if you have information as to what has already occurred over the past few days, months, or even years, you are again placed in a better position to more logically conclude what will happen next.  You simply learn the pattern and follow it to the end, reaping the financial rewards.

Charts And Chartists

Wait, did you think you were going to have to research and map out the market’s past all by yourself?  Of course not!  There are people who get paid to do that sort of work.  They monitor the market hourly, daily, weekly, monthly, and yearly so that they can provide big-time traders with the same knowledge mentioned before.  The more an investment company knows about the market, the more money they can make.  The same is true for stockbrokers.  They make money when you make money, and they want to do the best they can to make sure that you make intelligent decisions.

The best part of this is that you have access to the same information as these VIP clients.  Chartists, who are essentially market analysts that publish their findings in easy to read charts, produce what is referred to as a candlestick chart.  These charts are basically a combination of a line graph and a bar graph that show the trend of various stocks, indexes, or other interests over a specified period of time.  Therefore, you can easily determine if the commodity is on an uptrend or if it is taking a downturn, when the last major change occurred, and how long it is predicted that the stock or bond will continue on the current path.
 

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Today we will see how the currency exchange works, a good understanding of this will set the next steps for a solid Forex Trading education.

When you begin trading on Forex, you have to learn how to convert currencies and note the difference in values, as well as how currencies are exchanged between international lines.  This means studying not only domestic market trends and currency values, but also those of foreign markets.

Working With Multiple Currencies

Since Forex is the Foreign Exchange Market, you obviously cannot expect everyone within the market to trade in U.S. dollars (and why not, you might ask? – but remember that not everyone covets the U.S. dollar).  With so many variables and volatile currencies being exchanged, how can you know a good buy or sell when you see one without complete awareness of the value of foreign currency?

The first step is to find a source that will give you a basic idea of the current exchange rate between your domestic currency and the foreign currency in question.  You should do this as a base listing for any currency that with which you might become involved.  Of course, this will not be consistent down to the cent or fraction of a particular currency throughout an entire business day, but at least you will have your starting point from which to begin, almost like North on a compass.  Such sources can be found all over the Internet, as well as through many brokers, both on line and in person.

Currency Expression

It is also good to understand the means be which the currency conversion is expressed.  The comparison is usually made in a ratio known as the cross-rate.  In this configuration, the two currencies are listed in an XXX/YYY ratio, with the XXX position referred to as the base currency.  The base currency is usually expressed as a whole number, while the YYY position is expressed as the decimal that most closely matches the based currency rate.  It is sort of like making reference to miles per gallon or rotations per minute on a car – a direct comparison of one to the other in the form of a ratio.

Just to give you some heads up of what is coming, in my next post, I will be talking about Statistics. Yes, trading Forex involve Technical analysis, and if you know how to identify statistic paterns you know how to put the chances in your favor and if you do that correctly youi will be making money.

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