Background of Forex Trading

The forex market was first established in 1971 when many of the world’s major currencies moved towards floating exchange rates. Forex transactions are conducted between two counter parties on the OTC (Over-The-Counter) market and these parties agree to trade via an electronic network or via the telephone. Forex trading can be conducted 24-hours a day and five days a week therefore providing a very flexible schedule for forex investors. If you are interested in learning how to trade forex, you must first obtain a forex trading education in order to be successful.

Basics of Forex Trading
The first bit of information you should know before you start trading forex is that it is also known as foreign exchange trading. Forex is the immediate exchange of one country’s currency for another and requires impeccable timing in order to gain profit. Each investor will also learn about market conditions so that they are able interpret market scenarios that are favorable to making a profit. Another basic part of a forex trading education is to learn how to manage and open a trading account. You will learn that you should start out with a demo account where you can practice trading without real money. Once you are comfortable with the forex trading platform that you choose to use, you can then open a live account and start trading with real money.

Forex Trading Styles
Your forex trading education will also teach you about two different trading styles that each investor can use when trading currency. These styles are referred to as fundamental and technical analysis. Fundamental analysis requires the investors to analyze key economic data, political conditions and news and government reports. Forex traders who use fundamental analysis believe that currency exchange rates are affected by key elements such as inflation, interest rates, employment statistics, and market sentiment, to name a few. The investor who opts to use technical analysis tools to trade forex, makes his or her decisions based on charting tools and quantitative trading models. The goal of investors who use technical analysis is to study historical data in order to predict future market movements. Part of their trading education is to learn how to utilize charts in order to make these predictions.