Global Currencies

Chapter 1

Forex Basics

Chapter 2

Fundamental Factors

Chapter 3

Technical Tools

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Aspects of Trading

Most trades on the forex market are a result of traders speculating price movements of certain currencies. Although, good instincts and speculation skills are invaluable to any trader, there are also other, more scientific factors that traders use to tell whether they will buy or sell a certain currency. These factors are very important aspects of trading on the market and are known as fundamental and technical analyses. A trader may utilize both technical and fundamental analyses before making any forex trades.

The Importance of Fundamental Analysis

These factors include economic and political events (i.e. elections, wars) that occur worldwide. Fundamentals include monetary and fiscal policy, government reports such as GDP, CPI, PPI, and measures such as the unemployment rate. A trader that bases his or her market decisions in response to these releases and events is using fundamental analysis. The value of a currency in the Forex market is essentially an indication of the state of one nation's economy in comparison to another nation's.

A nation's political condition, along with its inflation and interest rates, impact the price of the nation's currency. Traders that use fundamental analysis can speculate on currency price movements by paying attention to the world news, economic reports, and indicators issued by the government. By interpreting that data, traders can make better decisions on the market. It is important to note that it is the outlook of an event that impacts the Forex market, rather than the actual event itself. If the report or news matches expectations it should have already been priced in to the present market price. If a report or news item is unexpected, or is different from the anticipated results, then there will be a reaction by the currency markets to "price in" this new information. We explore fundamental analysis in greater detail in Lesson 6.

The Importance of Technical Analysis

Traders have a second tool to use in trading. Technical analysis, which has become extremely popular since its inception two decades ago, consists of using charts, trend lines, support and resistance levels, technical indicators and identifying patterns to study the market's behavior. Traders use these technical factors to identify buying and selling opportunities. Over long historical periods, currency behavior has produced trends and patterns that are identifiable. We explore the basics of technical analysis in Lesson 7.

Risk Warning

Before deciding to participate in the Forex market, you should carefully consider your investment objectives, level of experience and risk appetite. Most importantly, do not invest money you cannot afford to lose.

There is considerable exposure to risk in any off-exchange foreign exchange transaction, including, but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair.

More over, the leveraged nature of forex trading means that any market movement will have an equally proportional effect on your deposited funds. This may work against you as well as for you. The possibility exists that you could sustain a total loss of initial margin funds and be required to deposit additional funds to maintain your position. If you fail to meet any margin requirement, your position may be liquidated and you will be responsible for any resulting losses. To manage exposure, employ risk-reducing strategies such as 'stop-loss' or 'limit' orders.

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Forex.com/UK acts as the clearing agent and counterparty to customers introduced by "Global Currencies" for an IB margined forex transactions. FOREX.com is a trading name of GAIN Capital - FOREX.com UK Limited and is authorised and regulated by the Financial Services Authority. FSA No. 190864.