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Day trading forex market behaviour
Day trading forex market behaviour
by Jay Moncliff
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Technology advances like the internet have spawned a new craze,
where anyone with a secure internet connection prepared to
undertake a small amount of training can engage in trading
foreign exchange on the forex market. Just as a day trader will
closely track stock price movements on the Dow Jones Industrial
Average, all over the world forex traders monitor currency
fluctuations in a similar fashion.
Forex traders have the aim of using the smallest amount of one
currency, say the US dollar, to purchase another currency like
the British Pound. If supply of the pound lessens in a busy
market, it will cost more dollars to buy pounds, and the forex
trader hopes to sell their pounds at a higher than their
purchase price. In many respects, this type of trading behaviour
is very similar to trading in stocks, where the aim of nearly
all traders is to buy low and sell high.
The trading process works under a bid/ask system. In the above
example, a forex trader might bid 10 dollars in return for 5.7
British pounds, and the seller of the pounds could be asking 11
dollars for the same amount of pounds. If the seller accepts the
bid, the trader then hopes the pound continues to increase in
price, so that when time
comes to sell, they can get in excess
of the 10 dollars initially paid.
As only registered traders have access to this auction process,
most online speculators will trade through a bank or broking
house. Such brokerages charge a commission for facilitating the
trades, and forex traders should consider these transaction
costs when calculating their selling offer when time comes to
exit their position, as this will influence their profit margin.
The global foreign exchange market can trade in excess of a
trillion dollars a day. Sheer market size means there is
considerable money to be made, and lost, through miscalculation.
It is neither a guaranteed, nor easy path to riches, so traders
should be educated in how to play the market. Instructional
packages are available, and should be carefully reviewed as they
can easily range in quality and price.
About the author:
Jay Moncliff is the founder of
http://www.forexadvise.info a website specialized on Forex, resources and
articles. This site provides updated information on Forex. For
more info visit his site: Forex
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