In this post, we dip into the 3 main types of forex market analysis – technical, fundamental, sentiment. Which type you will use in trading is up to you!
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Forex Trading FAQ
Currency trading has soared in popularity this century amongst professional and non-professional traders alike. Before the arrival of the Contract for Difference (CFD) market in the late 1990s, currency trading was an asset class that was difficult for individuals to trade or invest in. Read more about currency trading here.
If you had a negative view for the Euro, perhaps because you felt that the Eurozone economy was performing poorly and was going to continue as such, you might look to short the Euro.
You might also have a view that the UK economy was looking healthy and that the short-term data was going to reflect this and beat expectations.
In this case, you would look to express your view by selling the Euro and buying the GB Pound, which would be a short position on the EURGBP currency pair.
Let’s say you sold EURGBP at 0.8500, with a target for a move down to 0.8000. You might then place a stop loss at 0.8700 in case the currency pair moved in the opposite direction.
- If the market moved down to 0.8000, you would realise a profit.
- If EURGBP moved up to 0.8700, you would be stopped out for a loss.
The rate at which you can sell the base currency, in our case it’s the Euro, and buy the quote currency, i.e. the Japanese Yen.
Ask (or Offer)
The rate at which you can buy the base currency, in our case, the British Pound, and sell the quoted currency, i.e. the Japanese Yen.
The difference between the Bid and the Ask prices.
The value of one currency expressed in terms of another. Its fluctuation depends on numerous factors including the supply and demand on the market and/or open market operations by a government or by a central bank.
Usually, the contract size is based on a lot system, and for most currency pairs 1 lot is 100,000 units of a base currency.
Minimum rate fluctuation
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FX Trading: Related Articles
In this post, we will look at the six major currency pairs in Forex: EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD.