Currency Trading Strategies-Tips on How A Currency Trade Works

Foreign exchange trading is a speculative endeavour that requires proper training and education and should include strong discipline,risk management and money management skills.Just like in any market,the forces of supply and demand are in play.The emotional elements of greed and fear cannot be escaped.Have a plan that focuses on proper money and risk management techniques.Use stops to protect your money and minimize losses .Make money in both directions up and down.Unlike the equity market,there is no "upstick rule" that limits a trader's ability to sell short.Short positions can easily be entered by hitting the bid and are part of most speculative trading strategies.There is equal opportunity to profit in up and down markets.

Reading a currency quote:Reading a quote is very easy to do.It's really quite simple if you remember two things;1.The first currency listed is the base currency 2.The value of the base currency is always 1.The US dollar is the centerpiece of the foreign exchange market and it is normally considered the 'base' currency for quotes.In the margin,this includes US dollar/ Japanese Yen,US dollar/Swiss Francs and US dollar/Canadian Dollar.For these currencies and many others,are expressed as a unit of $1US dollar per the second currency quoted in the pair For example a quote of US dollar/Japanese Yen 110.01 means 1 US dollar is equal to 110.01 Japanese Yen.When the US Dollar is the base and a currency goes up, it means the US dollar has appreciated in value and the other currency has weakened.If the US dollar/Japanese Yen quote I previously stated increases into 113.01,the dollar is now stronger because it will now buy more Yen than before.The three exceptions to this rule are the British Pounds,the Australian dollar,and Euro.In these cases,you might see a quote such as British Pounds/US dollar 1.7366,meaning that one British Pound equals 1.7366US dollars.In these three currency pairs,where the US dollar is not the base rate,a rising quote means a weakening dollar,as it now takes more US dollars to equal one British Pounds,Euro,or Australian dollar.In other words,if a currency quote goes higher,that increases the value of the base currency.A lower quote means the dollar is weakening.Currency pairs that do not involve the US dollar are called cross currencies,but the premise is the same.For example,a quote of Euro/Japanese Yen 127.95 signifies that one Euro is equal to 127.95 Japanese Yen.When trading foreign exchange,you will often see a two-sided quote consisting of a bid and ask.The bid is the price at which you can sell the base currency.The ask is the price at which you can buy the base currency.

Meaning of a pip:In the foreign exchange market,prices are quoted in pips. Pips stands for percentage in point and it is the fourth decimal point which is 1/100th of 1%.In Euro/US dollar,a three pip spread is quoted as 1.2500/1.2503.Among the major currencies,the only exception to that rule is the Japanese Yen.In US dollar/Japanese Yen,the quotation is only taken out to two decimal points(i.e. to 1/100th of the Yen as opposed to 1/1000th with other major currencies).In a 3 pip spread is quoted as 114.05/114.08.

If you have found those tips useful you can learn a lot more at Click Here!