How to Trade the Forex Market

Forex Markets trade the actual exchange rate between two currencies (i.e. the most traded currency pair is the EUR/USD, this is the value of 1 Euro in US Dollars).

The Forex Market is the biggest and most liquid financial market in the world, with more than 3 trillion dollars of turnover on a daily basis. There is no physical location, where all the volume is traded at, this is called an Over The Counter (OTC) Market, due to the fact that all transactions over the world are conducted via telecommunications (phone, on-line platforms, etc).

The basic idea about how to trade the Forex market, as well as other markets, is try to buy cheap and sell high and vice versa. It is not as easy as it sounds though, we first need to analyze the long term charts and determine which pairs are likely to go up, down, trade in a range, or will trade in an erratic range.

This is the GBPUSD 30 minute chart, as you can see, the market is ranging (when it gets close to the top of the range, the market starts to fall down to the bottom of the range, over and over).

Our job here as traders is to identify :

• At what point we should enter the market (timing)
• How much to risk on each trade
• When to exit the market if it goes against us, or in our favor.
• Once we are in a trade, how we will manage it (add to the position, take partial profits, etc).

Then we can make a trade decision and trade the Forex Market.