It’s surprising how many people believe that forex market trading is somehow similar to stock market trading. The two markets are completely separate entities, trading very different securities on different markets to each other. While you get to trade stocks and shares on the stock market, you trade the currencies of other countries on the forex market.
Forex is simply an abbreviation for foreign exchange and forex market trading is the activity undertaken by speculative investors hoping to profit from the frequent rise and fall in the value of various currencies. The beauty of the forex market is that it’s possible to profit no matter whether the market is going up or down.
When investors go about their forex market trading activities, they understand that each trade is conducted in pairs. Effectively they sell one currency in exchange for buying another currency. While it’s possible to trade any combination of potentially hundreds of currencies, the majority of traders stick to combinations of the seven Major currencies. These are USD, GBP, EUR, CAD, CHF, JPY, and AUD.
The predominant reason for sticking to the seven Majors is that they can be somewhat less unpredictable than some of the emerging currencies, which have been known to be exceedingly volatile. Successful forex market trading relies on finding a way to determine whether the price of a particular currency is likely to rise or fall against the value of a second currency.
If your own forex market trading strategies are based on using one specific currency as your base currency and then working out the comparative values of other currencies against it, this is a wise way to gain a rapid understanding of how currency prices can rise and fall several times over a day.
However, if you wish to increase the likelihood of placing profitable trades, then you might consider expanding your forex market trading activities to use any of the other Major currencies as your base and then calculating the comparative prices against those in other crosses that don’t use your usual favorite currency as the base currency.
Once you begin considering multiple currency trading crosses, it becomes much more difficult to keep track of the pricings and charts for so many potential crosses on your own. For your forex market trading business to prosper and grow, you should consider using some form of automated forex software that is capable of tracking the rapid pricing movements for every currency you want to watch. When the software recognizes that a pricing trend may be emerging, it can issue a price indicator or alert that tells you it’s a likely time to enter the market and place a buy trade.
Your forex market trading software may only issue one alert in a day or it might issue five or six. The point of using analytical software to assist your trading activities is so you will know when it’s the optimal time to enter the market, exit the market, or take no position at all and simply wait for the market conditions to be more favorable to your trading activities.