Tax & Financial Consulting Services
Forex Trading 101 for Beginners
Dear G&G Readers,
The Purpose of Forex trading. The purpose of trading on any market is to buy low and sell high. The foreign currency market FOREX is no exception. The goods traded on this market are rates of currencies of different countries. As any other goods the currencies have their prices.
To settle transactions between businesses located in different countries, governments, speculative transactions and so forth, banks around the world execute currency trades on FOREX market. Depending on various trade, economical and other parameters, interest rates, central bank policies, time of the day, preferences and anticipations of the market players, and many other causes, the rates, that is prices, of currencies stay in ceaseless motion.
Your task as a trader is to determine the trend of the rate and buy an appreciating currency or sell a depreciating one, and then take your profits through execution of a reverse transaction.
You can do this by using computer software from your home to obtain real time currency quotations from different banks and the largest world exchanges participating in FOREX market.
Some codes, numbers and definitions
Each currency is assigned a three-letter code. For example, US dollar is coded - USD (United States Dollar), Euro is coded EUR (EURO), Swiss frank is coded CHF (Confederation Helvetica Franc), Japanese yen is coded JPY (JaPanese Yen), British pound is coded GBP (Great British Pound). Currency rates are equal to ratios of currency units of different countries relative to each other. The rates are represented by 6-letter words composed of two three-letter currency codes. The first position is occupied, as a rule, by the code of a more expensive currency. The rates are expressed in units of the second currency per unit of the first one. For example, rates USDCHF (USD-CHF) show the number of Swiss franks in one US dollar, but rates GBPUSD (GBP-USD) show the number of US dollars having to be paid for one British pound.
The rates are usually expressed as five-digit numbers. For example, USDJPY = 99.50 means that 1 US dollar is valued at 99.50 Japanese yens (i.e. they are willing to pay you that many yens for one US dollar while you are buying or selling). At the same time, GBPUSD = 1.5262 means that 1 British pound is valued at 1.5262 US dollars. Generally, if the rate XXXYYY = Z, it means that one unit of XXX is worth Z units of YYY.
I think that's enough for this week. I hope you were motivated enough to take on the last homework assignment and learn was a "PIP" was and how beneficial the FOREX market could be to you if you learn how to invest in the largest market in the world.
In the last newsletter, I told you I would keep you posted on the account I started to show you how you could literally start out with $1000 and within 13 months be making a $1,000 a day in the FOREX market. Again, you can open up a live account for as little as $300 to start trading in the FOREX market. But, I recommend you open up a FREE practice account at one of the many online brokers to start getting your feet wet in the market.
A good site to visit to learn more about the FOREX market is www.fxstreet.com. It's like the consumer report for the FOREX market. Well, until the next time...Happy Pippin!
Results as of May 8, 2009: www.gngassoc.com/Forex/090508_EOW.pdf
Opened Acct on April 16, 2009 with $1000...in less than a month, account is up 50.94%...WOW!
"The more you learn the more you earn, the less you know the more you owe."
Tax & Financial Consultant, RFC
866-361-3872 toll free fax
"A Prudent man foresees the difficulties ahead and prepares for them; the simpleton goes on blindly and suffers the consequences."
Proverbs 22:3 -- Living Proverbs
LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility. G&G Associates gets paid a commission from a membership purchase at www.publicgold.com/gngpreciousmetals.