Forex Trading Tutorial

By: EconomyWatch   Date: 11 August 2009

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EconomyWatch

The core Content Team our economy, industry, investing and personal finance reference articles.

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The forex market is the trading ground of currencies, the values of which are impacted by politico-economic developments. The need to exchange one currency for another makes the forex market the most liquid financial marketplace in the world. With no centralized regulatory body, investors are dependent on forex trading tutorials for guidance.

 

Forex Trading Tutorial: What does it cover?

A forex trading tutorial makes novice forex traders aware of:

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      the ways in which investors can trade in foreign exchange: spot market, forward market and futures market.
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      the major participants in the forex market: governments, central banks, other banks, financial institutions, hedgers and speculators.  

Forex Trading Tutorial: Theories

 

While the academic theories related to currencies may not be directly applicable to everyday trading, they help in understanding some basic concepts. Most of these theories are related to parity conditions. Some of them are as follows:

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      Purchasing power parity is the theory that price levels in two countries must be equivalent after the adjustment of exchange rate.

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      Interest rate parity suggests that assets with the same risk in two different countries must have similar rates of interest.
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      International Fisher Effect states that the exchange rate between two currencies must undergo a change by an amount similar to the difference in their nominal interest rates.
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      Balance of payment theory takes note of a country’s current account (the account which reflects the trade of tangible goods) to conclude whether a currency’s exchange rate is in equilibrium.  

Forex Trading Tutorials on Quotes   

Currencies in the exchange market are traded in pairs. The value of a currency is reflected against the value of the currency it is exchanged for. Forex trading tutorials teach investors to quote in pairs, cross quote, bid and ask.
 These tutorials help in understanding jargons, such as pips, spreads and margins, which are useful for the assessment of trading performance.
Trading in currencies can be profitable if one uses a forex trading tutorial to keep a check on market activity. There are multiple online tutors who assist investors with modules and trading accounts. Forex trading tutorials help understand the implications of margin trading and pitfalls and opportunities of exchange. These trading tutorials give access to simulations and practice accounts which are necessary before investors go “live.”

 

 


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