The Basics of Forex Trading

Todays publication aims to enlighten you regarding the building blocks of forex trading . Familiarizing yourself with forex basics empowers you as an investor to make more educated market projections and, in turn, more accurate investments. Primarily, you will learn key forex terms and how those definitions help embody the formation, navigation and user engagement of the foreign exchange market.

Our core concepts today include:

Market Flow

Forex Definitions

Currency Pair Groups

Types of Forex Trades

Market Flow

The total of all buy and sell orders over any given period is known as price action. In other words, the market flow you see when looking at a stock chart image is price action. Many forex traders use technical analysis to understand real-time market flow better while gaining critical insights regarding asset support and resistance levels, high and low values, momentum, etc. By doing so, traders can better position themselves for more suitable investment opportunities.

To best monitor an asset in real-time, many forex traders use Japanese candlestick charting to gain more detailed insight into an assets market flow. The core advantages of Japanese candlesticks include:

• Gain overall market sentiment (bullish or bearish).

• See how your asset is economically performing.

• Japanese candlestick formations reveal market insights not seen in other charting styles.

When charting with Japanese candlesticks, know that you can change the amount of time a candlestick represents (typically 1 minute, 5 minutes, 15 minutes, 1 hour, 4 hours, one day, and one week). For instance, if you set your period to 1 hour, every candlestick reflects 1 hour of market flow. More than one candlestick composes what we know as order flow, or for forex traders, that currency pairs price action. As a result, one of the three following market trends may occur:

Bullish Trend

When a currency pair is appreciating, it is known as being bullish. In bullish markets, investor confidence is high, while emerging market currencies (EME), the Australian dollar (AUD), New Zealand dollar (NZD), and the Canadian dollar (CAD) tend to appreciate. On the other hand, safe-haven currencies like the US dollar (USD), Japanese Yen (JPY), and the Swiss Franc (CHF) tend to depreciate as an investors general risk tolerance increases. Traders strategically enter bullish markets with the intent to sell once they believe the market has peaked.