Forex Currency Trading System

While there are many ‘systems’ which can be utilized in Forex trading, when referring to the Forex currency trading system it usually refers to the concept of buying and selling currencies on the International market. How you choose to do that is your own personal preference. Any Forex currency trading system that allows you to realize overall gains with minimal losses is the system you should stick with. In the beginning, it is essential that you understand Forex and the concept of buying and selling currencies.

Understanding Forex Pairs
The first thing to learn about the Forex trading system is that currencies are bought and sold in pairs. While there are countless pairs of currencies which can be traded on the market, the most active segment of the market is in the top seven pairs consisting of four pairs referred to as the majors (always against the US dollar) and then three pairs referred to as the commodity pairs (also against the US dollar). The pairs are always listed in the following manner:

MAJOR CURRENCY PAIRS

  • USD/EUR
  • USD/JPY
  • USD/CHF
  • USD/GBP

COMMODOTY CURRENCY PAIRS

  • USD/AUD
  • USD/NZD
  • USD/CAD

In all the above examples, the first currency listed is called the base currency. The other currencies listed are the Euro, Japanese Yen, Swiss Franc, Great British Pound, Australian Dollar, New Zealand Dollar and Canadian Dollar. Most trading consists of these pairs and is considered to be a fluid market. Other pairs that do not include the US dollar when trading are referred to as cross currency pairs, sometimes referred to as ‘crosses’ or simply ‘cross.’

Why Buy and Sell Currencies?
One of the main reasons to have a Forex currency trading system is because currencies are never static. At any given point in time, one currency is worth more or less than it was just moments ago. Currencies are constantly in flux so that if you can sell when your base is up you make a profit, but if your base is down you realize a loss. By watching market trends investors try to forecast at which point currencies will gain or lose and sell when they are high, hopefully before they start coming down again. It is the same principle as trading on the stock or commodities market only you are buying and selling currencies, not products.

Forex Currency Trading System to Avoid
One of the biggest problems that many investors have is thinking in terms of stocks, commodities, gold, oil, and other products sold on the market. They mistakenly believe that if those markets are up then currencies will go up as well. While this is often the case, it is not necessarily so. It is true that as the markets make money the US dollar will be valued higher, but sometimes the wrong market is up which doesn’t impact currencies as we would expect it to. Any Forex currency trading system that is tied to other markets should be avoided. Grid trading, once you understand Forex, is perhaps the safest system because you buy and sell at very small intervals. Although your gains will be slower to accumulate, you should not realize giant losses overnight.

There is no magic Forex currency trading system that will work 100% of the time. If this were the case then we would all be millionaires almost overnight. There are, however, trading systems that have a high rate of success which can be trusted to work for you if you employ them as they should be used. Whether you are using Forex software of the services of a broker, you still need to understand the concept of Foreign Currencies (Forex) and how to buy, sell or hold as needed.

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