What is Forex Trading
What you need to know before starting
Forex Trading is trading one currency pair against another. There is a Base Pair against the corresponding pair. For Example in GBPUSD the base pair is GBP because it is the first listed pair. The corresponding pair is USD. This is to say that GBP is traded against the USD. If GBP is gaining strength against the USD then the chart will go up. If the USD is gaining strength against GBP then the chart will go down.
How to trade Forex
The general concept
There are two types of Forex Trading. Future Forex is the contracted Futures of a given currency. Soft FX or Spot FX is the currency pair traded against another. In Futures Forex you are only speculating on one currency whereas Soft FX you are speculating on two currency pairs at once.
When trading Forex the most commonly traded instrument is Soft FX or Spot FX. When trading Soft FX it is best to look at both pairs of currencies. You generally want to select a strengthening pair to trade against a weakening pair. For example: If the USD is showing extreme strength and the NZD has recently been weak. It is best to select the chart NZDUSD and go on the short side. This is to say that the USD traded against the NZD the USD will be gaining strength against the NZD. Therefore the chart will go down. Because NZD is the base currency.
Tips and Tricks to Improve your Forex Trading
Things you might have overlooked
Forex trading is quite easy but takes a bit of focus and discipline. Many traders blindly look at the charts and start pressing buttons. This is the worst thing you can do. Forex is one of the oldest markets on the planet and the world's financial markets are interconnected. There is always a reason for something due to the age of information. Movements in the markets are often caused by monetary and social policies. One thing that you might have overlooked in your trading practice is keeping up with the news. We highly recommend you use Forex Factory as an economic calendar. You must keep up with the big banks are doing with their policies in order to find success. The only reason is that you want to be on the right side of the market when the big players are involved. Other than that you might want to ignore the news all together since most of the time price will react to the news.