Forex Basics

5 Min Read

If you’ve already read the “What is Forex?” section then you should know what Forex market is and what it is all about. If not, please, do it.
There are five essential aspects of foreign currency market a beginner trader (and an old one as well) should be aware of:

Understanding and mastering these aspects of trading are crucial to organize your Forex trading experience.

Forex Fundamental Analysis

Fundamental analysis is the process of market analysis which is done regarding only “real” events and macroeconomic data which is related to the traded currencies. Fundamental analysis is used not only in Forex but can be a part of any financial planning or forecasting. Concepts that are part of Forex fundamental analysis: overnight interest rates, central banks meetings and decisions, any macroeconomic news, global industrial, economical, political and weather news. Fundamental analysis is the most natural way of making Forex market forecasts. In theory, it alone should work perfectly, but in practice it is often used in pair with technical analysis. Recommended e-books on Forex fundamental analysis:

Forex Technical Analysis

Technical analysis is the process of market analysis that relies only on market data numbers – quotes, charts, simple and complex indicators, volume of supply and demand, past market data, etc. The main idea behind Forex technical analysis is the postulate of functional dependence of the future market technical data on the past market technical data. As well as with fundamental analysis, technical analysis is believed to be self-sufficient and you can use only it to successfully trade Forex. In practice, both analysis methods are used. Recommended e-books on Forex technical analysis are:

Money Management in Forex

Even if you master every possible method of market analysis and will make very accurate predictions for future Forex market behavior, you won’t make any money without a proper money management strategy. Money management in Forex (as well as in other financial markets) is a complex set of rules which you develop to fit your own trading style and amount of money you have for trading. Money management plays very important role in getting profits out of Forex; do not underestimate it. To get more information on money management you can read these books:

Forex Trading Psychology

While learning a lot about market analysis and money management is an obvious and necessary step to be a successful Forex trader, you also need to master your emotionsto keep your trading performance under strict control of mind and intuition. Controlling your emotions in Forex trading is often a balancing between greed and cautiousness. Almost any known psychology practices and techniques can work for Forex traders to help them keep to their trading strategies rather to their spontaneous emotions. Problems you’ll have to deal while being a professional Forex trader:

  • Your greed
  • Overtrading
  • Lack of discipline
  • Lack of confidence
  • Blind following others’ forecasts

These are very professional books on psychology written specially for financial traders:

Forex Brokerage

Every Forex trader like any other professional needs tools to trade. One of these tools, which is vital to be in market, is a Forex broker and specifically for Internet – on-line Forex broker – a company which will provide real-time market information to trader and bring his orders to Forex market. While choosing a right Forex broker things to look for are the following:

  • Being a professional company you can trust
  • Provide you with real-time quotes
  • Execute your orders fast and accurately
  • Don’t take a lot of commissions
  • Support the withdraw/deposit methods that you can use

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