In the previous article, titled “Regulation in Forex Trading” we discussed how the Forex market is regulated, what are the respective regulatory authorities in some of the developed countries as well as what regulation means for traders.
And while indeed, governments and central banks have many shameless instances where they actively intervened in the currency markets, most of the time they prefer to just monitor things without getting actively involved.
Having a great trading plan means nothing without the trading acumen to put the plan into action and the discipline to stick to it.
Below we look at each of the different assets and briefly discuss the main factors that drive their prices.
In this article, we’ll briefly discuss the most popular ways to trade the Forex market and the differences between each of them.
With depth of market data, clients get access to volume and liquidity information and can use it to their advantage. They have an insight into the sentiment of the market with the quantities of volume available at different prices which can often indicate the potential market direction in the future.
Traders on Forex trade a currency and wait for the value of the currency to either rise or fall compared to the value of the other currency from the chosen currency pair. There are many currency pairs, but it is up to the forex brokers to decide which currency pairs they will offer to their clients to trade.
Although this is the exchange rate that everyone is looking at and referring to, markets are known to often overprice or underprice financial assets, and the same holds true for currencies.
To find out how much a currency pair is over or underpriced and to determine the longer-term fair value of an exchange rate, economists use several different methods by which they can obtain the so-called “real” or effective exchange rates.
Devaluations and Revaluations vs. Appreciation and Depreciation
This is in contrast to a floating exchange rate system as is the standard among most developed countries where the value of a currency is determined by supply and demand forces in the market.
Cross pairs are not moving in isolation – Majors and crosses are closely related
Aside from the relationships that exist between some of the major USD pairs, cross currency pairs also have certain relationships to the major pairs and to other crosses.
Nevertheless, many trading opportunities exist among both the major and the minor currency pairs.
Rationales cited behind this thinking include arguments like, major pairs are more liquid, easier to trade, less volatile, less unexpected spiking price action, generally better execution (for short-term trading) and so on.
In fact, feature-wise unregulated brokers will usually offer more, and may generally look much better than regulated brokers. However, it’s very important to keep a realistic perspective and not get sucked in by these tricks because most of them are designed just to steal your money.
In practice, letting a winner run can many times translate a winner turning into a loser and cutting losers early can, in the end, turn out to be cutting a winner prematurely.
And certainly, those are situations we most utterly wish to avoid.
Some additional common trading errors or pitfalls that can arise from failing to follow a trading system are discussed further in the sections below.
Forex Education - Basics:
Forex Education - FX Brokers:
Forex Education - Technical Analysis: