Paid to Play

The market is open 24 hours a day, 5 days a week, to accommodate all of the time zones for all of the major players. Another completely separate but perhaps more important concern with trading in Forex is understanding how trade works in multiple currencies.

When you begin trading on Forex, you have to learn how to convert currencies and note the difference in values, as well as how currencies are exchanged between international lines. With so many variables and volatile currencies being exchanged, how can you know a good buy or sell when you see one without complete awareness of the value of foreign currency. Such sources can be found all over the Internet, as well as through many brokers, both on line and in person.

The comparison is ually made in a ratio known as the cross-rate. For example, if the British pound sterling can be traded in thoandths, the currency will be expressed to the third decimal place.

In one cross-rate expression example, one US dollar may be equivalent to 117.456 Japanese yen. This is becae the exchange rate may vary from 117.456 to 117.423, but not to 119.024.

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In the past, there would have been many more currencies to keep track of (such as the franc, the lira, or the Deutschmark). We will discs this process, as well as other ways to take advantage of the Foreign Exchange Market (like arbitrage) in more depth in future chapters.

Such ideas will not seem so ‘foreign’, and you will be caught up and knowledgeable right along with the pros. The next chapter will explain more about ing the statistics that are published to forecast the next move on the stock market. Simply learning to read market trends can remove a lot of natural apprehension and uncertainty for beginning traders.

Volatility, or the tendency for fluctuation that can affect your earnings within the stock market, is typical within a domestic market but even more evident and much stronger on the Foreign Exchange Market. For example, if the U.S. dollar is worth ten units of a foreign currency that is then devalued by ten percent, the U.S. dollar is now equivalent to only nine units of the foreign currency.

While it may seem that purposely adjting the value of a nation’s currency is ‘cheating’, or taking an unfair advantage by making foreign products cheaper to purchase and increasing the value of exports, there are regulations in place to prevent the manipulation of exchange rates for such purposes. There are ways in which you can take advantage of devaluation and revaluation, which will be discsed later on.