Forex Trading - Find out what Forex is
Probably the vast majority have heard about the forex market, but few of these people really know what Forex Trading is and how forex works. Forex trading is an activity available to anyone who has a computer and the Internet, but few people really understand what exactly Forex trading is.
Forex trading is not easy, especially for those who want to learn it quickly with unrealistic expectations as to the results. It is very important to be aware that Forex trading is not a quick and easy way to become wealthy.
In the beginning, there was supply and demand, which is what Forex Trading is
In economics, there is a supply and demand model that explains the behavior of price in a free market. The price of a good is established at the equilibrium point where demand and supply balance each other.
Let's say you go shopping one day at the grocery store. You need apples and it so happens that there is only one stand where apples are sold. You negotiate the terms of the exchange: a given amount of capital for a given amount of apples. Congratulations! Both you and the seller got what you wanted - you made the transaction.
The next day you have to buy apples again, you go to the same place. This time there are already two sellers and each of them has the same amount of apples you need. This means that there is a greater supply of apples than the demand for these apples. Competition between sellers will drive apple prices down and you will realize that you can buy more apples for the same capital. The new price will be fixed and you will make a transaction with the seller who offers better trading conditions.
The great thing about the free market is that you could get these apples cheaper. Suppose you brought a friend who is also interested in buying apples, but there is only one seller. In this case, the demand will exceed the supply. The seller can consider this and raise his price. You will spend more capital with your friend and you will still be unsatisfied because you need more apples.
Forex Trading - Analysis is the key of Forex trading
Analysis is the only key to trading success. The only thing that works in the foreign exchange market.
The two main schools of analysis are fundamental and technical:
The basic analysis is taken from financial audit, only on a national scale, and sometimes on the entire global economy. It is the oldest method of analyzing what the domestic economy looks like: what phase of the cycle we are in, what macroeconomic events we should pay attention to; how the forecasts, indicators and factors will affect the market.
Fundamental analysis takes into account various macroeconomic indicators and events:
applications for unemployment benefits,
Each event has a different effect on Forex Trading. For example, large oil wells in the United States and new oil extraction technology are helping to increase supply now and in the future, which has driven oil prices to one of the lowest prices since 2009. In fundamental analysis, you have to understand how economic interactions between countries work, you have to deal with the facts and how they will affect markets in the long run. The downside to this method is that we can't always be sure if something is that important to the market.
The advantage of fundamental analysis is that when we have a good estimate of the fundamentals, and of which direction the price will go in the long term, we will be able to generate profit in the long term.
Technical analysis is younger than fundamental analysis and only takes into account two factors: time and price. Both factors can be counted with some probability, and the future will keep us accountable for our work. How does Forex Trading work? Forex trading works more efficiently when we analyze the chart than we follow hundreds of macroeconomic information.
Whatever you plot on the chart, support and resistance lines, important levels, technical indicators, or compare patterns - you will be able to understand how Forex works without looking at the causes of supply and demand. Technical analysis can be used for both short-term and long-term trades. This is the only trading style a scalper can employ that trades online in very short moves and liquidity, not trend.
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