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When, Why and How of Foreign Exchange Rate Trading

This article provides information on trading the foreign exchange rate market.

Foreign Exchange Rate Trading

All new traders want to be successful in foreign exchange rate trading.  The only way to achieve success is through forex training and education; however, many can become confused when learning about the different currencies being traded.  This article will review the process of trading on the foreign exchange market in a manner that can be understood by beginner and experience traders alike.

Foreign exchange rates trading

There are various aspects to consider before you can engage in foreign exchange rates.  Firstly you must examine what you are trading, and then you should look at how you execute trades.  Finally, you should look at when the most beneficial time is for you to trade.

1. What you are trading

The basic premise of foreign exchange rate trading is exchanging one country’s currency for another country’s currency in a currency pair.  A trader is allowed to trade any global currency, however new traders are advised to utilise pairs with the major currencies exclusively.  This is due to the fact that more information is available and accessible for the major currencies.  Once you have gained more experience in trading you can consider moving onto more exotic pairs.

2. How to execute trades

One of the most unique features of the forex market is its online format.  Originally the foreign exchange rate market was traded by large players such as hedge funds and central banks exclusively; but with the introduction of online trading the average individual is now able to access and trade on the market.

In order to trade on this online market you will require an online trading platform.  These platforms are available via a foreign exchange rate broker.  It is important to consider certain factors when searching for a trading platform as the type of platform you use will affect your trading.

Satisfactory platforms will be easy to navigate and offer built-in technical analysis trading tools, such as forex charts and signals.  An ideal platform will present with additional features such as a live forex newsfeed with commentary on market movements.  It is vital you find a trading platform suited to your trading style as you will be executing all your trades through this platform.

3. When to trade the foreign exchange rate market

As is mentioned above, one will use particular currency pairs to trade on the forex market.  It is important to conduct research into the economic status of your currency pair’s country as this influences the best time to trade.  The foreign exchange market operates on a 24 hour trading timeframe from Monday to Friday, thus is open all day and night.  It uses different market sessions in order to meet these operating hours, and you must be aware of the hours which are most beneficial to your currency pair.

Furthermore, one must be aware that the different market conditions are based on trading hours.  Contrary to popular belief, the forex market shows low activity more often than high activity.  You should be aware of these hours and coordinate your trading according to your strategy and currency pairs.

 

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