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Learn Currency Trading

Updated on March 17, 2010

If you are wanting to learn currency trading online then you have definitely come to the right place.  I am going to help to teach you some of the basics of currency trading, so that you can learn Forex currency trading (which is short for Foreign Exchange markets) and become a pro who is making a lot of money through currency investments.

The key though, is to not just do a little bit of dabbling here or there.  As with most investments, that just leads to a disaster since you are uneducated in the investments and are relying more on luck.  Your inexperience can definitely drown you, especially when dealing with the currency markets which are highly volatile and while you can use brokerages for leverage which can maximize your gains, it can also maximize your losses.

How the Currency Market Works

If you have or haven't done any type of stock trading, you probably have a pretty good idea how a stock works.  A stock is usually base don how well a company is doing and how much that company is worth.  If people are selling the stock more, then the price goes down, but if they are buying it, the price goes up, and with all of those purchases, it essentially sets the stock price for that moment in time.

And although currency trading is investing like stock is, that's where the similarities end.  Currencies aren't based around just one currency, instead it is in relation to another currency.  you'll have noticed this phenomenon if you have ever done any traveling overseas.  When you get to that country, you probably will have had to use a currency exchange company to get the local currency.  Then, when you left, you may have been surprised or shocked that the amount is different, either in your favor or not.  That is because the currency values when compared to each other changed while you were on vacation.

I will hopefully be able to teach you the basics, so that you can get started with trading currencies.

Currency Pairs

As I stated above, currency trading is based on the relation of one currency to another, and the term from this is currency pairs.  You will see the different currencies listed as so:  For United States Dollar vs the Japanese Yen, you'll see it listed as USD/JPY.  This is to indicate the base currency (the first one listed) in relation to the other currency.

The currencies aren't quite listed like that above.  They are listed with a number after them too.  So, you will see USD/JPY 90.5797.  This means if you sell 1 USD, you will get 90.5797 JPY.  When that number changes based on the strengthening or weakening of each of the currencies, that can indicate a good time to buy or sell, depending on what you're wanting to do to make money.

Getting Setup at a Broker

The key to trading foreign exchange markets is to get setup at a broker.  You'll deposit your money (often times $2000 to around $10000 is a good way to start).  Then, the way foreign exchange and currency trading brokers work is they give you extra money to use as leverage based on your deposit.  That allows you to leverage more money when buying and selling currencies, which in turn can really maximize your profit since you're not just limited to your deposit.  This maximizes your potential earnings, but at the same time, you can also lose a lot bigger too because of it.

Special Types of Currency Trading

Once you begin to learn about currency trading, you'll soon see that there are a lot of different ways that you can make trades with currencies that isn't just buying and selling the currency on the spot at the current prices or values.  Here are a few of the different ways to trade:

Currency Options Trading

One way to trade that is different is dealing with currency options.  Instead of buying and selling the actual currencies, you are buying the option to buy the currencies.  That may sound confusing so let me help to break it down for you.  You are buying the option to buy the currencies at any point in a certain time period.

Binary Options

This type of option is even easier to understand.  All you need to do is determine if the currency will go in up relation to the other currency in a specific time frame, which could be minute,s hours, days, or a month.  If it does what you predict in that time period (rise or fall) then you can earn 65-75% profit plus your investment back.  It doesn't matter how much it rises or falls in that time frame and you don't earn or not earn based on that, you just earn the % set by the broker before hand.

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    • drmingle profile image

      drmingle 

      7 years ago from United States

      Beautiful great write up. I am marking this one with Xomba. Keep up the brilliant job and thanks for contributing your hub.

      It’s always lovely to read a wonderfully written write up.

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