Description of the Market

The currency market is the largest market in the world, with a daily volume close to 1800 billion dollars. It is the only financial market that gives investors access to carry out transactions 24 hours a day, as there is always a financial center open at any time. The Australian and Asian banks open first, followed by the European and American ones. This special feature allows investors to always find a speculation strategy with which to make money.

Participants in the Forex Market

The currency market is an over-the-counter (OTC) market, which means that there is no central market and clearing house where orders are negotiated.

Brokers all around the world are connected 24 hours a day by telephone, computer and fax, creating a market with excellent liquidity, providing investors with the possibility of liquidating their positions at any point in the day.

Technology has broken down the barriers that existed between the end users of currency purchase/sale services and the inter bank market, becoming the investor’s greatest ally thanks to its power of range, which allows anyone wishing to participate, to do so.

Forex Market Analysis

As in the stock markets, we have those who favor basing trading decisions on technical analysis and those on fundamental analysis. Both can be equally as useful and should be taken into account, especially if the particulars of the currency markets are recognized. The historical and statistical basis in technical analysis is most often the study of choice for those involved in more short-term positions. On the other hand, fundamental analysis is favored by those more concerned about the long-term and true valuation of a currency.

Technical Analysis

Technical Analysis looks at historic price actions to forecast future price movements. Analysts look for key support and resistance levels to see where the market believes a currency pair is cheap or overpriced. Statistics also play a huge role through the use of technical studies such as moving averages, bands, and the relative strength index. Charts are very important for technical analysts as they try to detect emerging trends and patterns.

Technical Analysis is perhaps most useful in the FOREX market due to its strong tends. Additionally, the market´s liquidity and lack of gaping creates more data points on the charts and a fuller picture of the market.

Fundamental Analysis

Fundamental analysis takes into account underlying factors that would influence the price of a currency. Most fundamental analysis in currencies involves watching news events closely and ganging market reactions. Many fundamental analysts are long-term traders, understanding the strong tendencies in the forex market. They watch the release of economic reports such as the Consumer Price Index, Gross Domestic Product, and the Employment Report. Also, decisions from policy makers such as interest rate hikes are important. For instance, a hike in interest rates are likely to be favorable for that particular country as it would create demand for the currency. Every trader may be successful if he operates strategically bearing in mind the following principles: Maximize profits

Always remember to have an already fixed plan at the time of trading. Define the currency contract you are going to trade, the amount in lots you are going to buy or sell, the price and the limit and stop you will impose upon your trades. Analyze charts. Test your abilities bearing in mind all this information. 

The use of an adequate strategy will maximize your profits; bear in mind that you will not make a profit in all your trades but the important thing is that you make a profit in most of them. Use limit and stops in your trades, be cautious, let your profits flow and reduce your losses. Be cautious with your level of exposure on the FOREX market.

Since you are new to FOREX, do not operate against the trend, which is a common feature among some traders. Remember that there are two forms of Trading; see the technical analysis and fundamental analysis sections. Make full use of your tools; at Forex Africa you will find the necessary tools to trade in the FOREX market: news, charts, economic analysis and the latest market comments. Manage your risk using stop and limit orders. Make a summary of all your trades and observe which has been the most successful strategy you have applied to improve your performance.