6 Simple Steps To Forex Trading


What is Forex Trading?
Forex trading is the process of buying and selling of a currency in the open market. The process is simpler than it sounds. Making money by buying or selling a currency is all about logic. If the demand for a currency rises then the value of the currency will increase and vice versa. So let's start by figuring out how traders identify the demand for a currency.

Identify The Demand
The first step is to identify whether the demand for a currency will rise or fall. It sounds simple, isn’t it? Yes, that’s all that there is to it. Once you figure out whether the demand will rise or fall you would either buy or sell the currency. You will learn to identify whether the demand will rise or fall as you read on.

All Currencies Exist In Pairs
All currencies exist in pairs, eg. USD/INR, USD/JPY, EURO/USD etc. The important point here is to identify the stronger one amongst the two. Between the USD/INR, it is very evident that the USD is the stronger currency. Once the relationship between the pair is established it is easier to catch the price action and the chart patterns. If the demand for the Rupee rises, then the USD/INR chart should drop and vice-versa.

Local Factors
A Currency is an accepted mode of exchange and has a price associated to it depending on the existing demand in the open market eg. USD/INR = 68.55. However, this price is heavily influenced by changes in local economic parameters. Local parameters include core inflation, lending rates, bond yields, GDP growth and unemployment numbers.
  
Global Factors
All major currency exchange rates are impacted by the lending rates in the United States, which is also known as the Federal funds rate. The US Federal Reserve’s decision to hike or reduce its rates leads to increases or decrease in the availability of the US Dollar in the market. Increased supply causes the Dollar price to fall and vice versa. The rise in Dollar demand is reflected by the rise in the Dollar index. Thus, a higher Dollar demand would lead to softening of the paired currency.
 
Central Bank Intervention
A country’s central bank plays an important role in controlling the liquidity of the economy. By raising the lending rates, central banks push up the demand for the currency and vice versa. The liquidity adjustment facility also known as LAF helps forex traders identify the rise or fall in demand for the currency. This equation subsequently helps the trader to buy or sell the currency at any given time.   

Technical Indicators
The demand and supply equations help forex traders to determine the direction of the market. When demand rises, the trader buys the currency, subsequently, when demand falls, traders sell off. However, the entry points are primarily decided by technical calculations derived from the currency charts. Since the currency of a country is protected against high volatility by its central bank, traders need to manage the entry points and target areas very judiciously." data-username="AMPLIFYKOLKATA" data-message="asksdfds">
What is Forex Trading?
Forex trading is the process of buying and selling of a currency in the open market. The process is simpler than it sounds. Making money by buying or selling a currency is all about logic. If the demand for a currency rises then the value of the currency will increase and vice versa. So let's start by figuring out how traders identify the demand for a currency.

Identify The Demand
The first step is to identify whether the demand for a currency will rise or fall. It sounds simple, isn’t it? Yes, that’s all that there is to it. Once you figure out whether the demand will rise or fall you would either buy or sell the currency. You will learn to identify whether the demand will rise or fall as you read on.

All Currencies Exist In Pairs
All currencies exist in pairs, eg. USD/INR, USD/JPY, EURO/USD etc. The important point here is to identify the stronger one amongst the two. Between the USD/INR, it is very evident that the USD is the stronger currency. Once the relationship between the pair is established it is easier to catch the price action and the chart patterns. If the demand for the Rupee rises, then the USD/INR chart should drop and vice-versa.

Local Factors
A Currency is an accepted mode of exchange and has a price associated to it depending on the existing demand in the open market eg. USD/INR = 68.55. However, this price is heavily influenced by changes in local economic parameters. Local parameters include core inflation, lending rates, bond yields, GDP growth and unemployment numbers.
  
Global Factors
All major currency exchange rates are impacted by the lending rates in the United States, which is also known as the Federal funds rate. The US Federal Reserve’s decision to hike or reduce its rates leads to increases or decrease in the availability of the US Dollar in the market. Increased supply causes the Dollar price to fall and vice versa. The rise in Dollar demand is reflected by the rise in the Dollar index. Thus, a higher Dollar demand would lead to softening of the paired currency.
 
Central Bank Intervention
A country’s central bank plays an important role in controlling the liquidity of the economy. By raising the lending rates, central banks push up the demand for the currency and vice versa. The liquidity adjustment facility also known as LAF helps forex traders identify the rise or fall in demand for the currency. This equation subsequently helps the trader to buy or sell the currency at any given time.   

Technical Indicators
The demand and supply equations help forex traders to determine the direction of the market. When demand rises, the trader buys the currency, subsequently, when demand falls, traders sell off. However, the entry points are primarily decided by technical calculations derived from the currency charts. Since the currency of a country is protected against high volatility by its central bank, traders need to manage the entry points and target areas very judiciously.
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