New to currency trading???

Discussion in 'Forex Trading' started by lasner, Mar 25, 2006.

  1. lasner


    Hi guys,

    I'm new to trading forex. I've traded stocks and futures but never forex. I have a question. Is forex trading basically the same thing as trading futures and stocks but your just buying another currency with the U.S. dollar?

    For example let's say I think the euro will depreciate. Would I take the U.S dollar and purchase Euros or am I pairing two differenct currencies? If I'm pairing the currencies what if the U.S dollar drops and the Euro drops as well.

    I'm a little confused about currencies.
  2. gkishot


    You are trading another currency against another currency.
    In case of EUR/USD you are trading eur against the dollar. Just like for eur futures. If you think eur will appreciate against dollar you buy eur/usd (go long). If you think eur will depreciate against the dollar you sell eur/usd (go short).
  3. lasner


    Sorry but what exactly do you mean eur will appreciate against dollar? Do you mean the euro will increase as the dollar decreases or do you just mean the euro will increase.
  4. The former...

    If you are trading EUR/USD and you go long, you are buying Euros and selling Dollars.

    You will make money if the Euro goes up.
  5. Currencies only appreciate/depreciate in comparison with other currencies.

    Most typically when it's reported in the media that euro is stronger or weaker it is in relation to the dollar; however, the euro could conceivably be stronger vs all other currencies except the dollar, which would entail that all other currencies have fallen versus the euro and the dollar -- the latter of which has gained strength against all other currencies (including the euro).
  6. Why have you switched from Equities and Futures to Forex?

    Did you perform poorly in the other two and expect to do well in Forex?

    Or are you just on the hunt for experience in another market?
  7. Lasner,

    Let's say you think the EU (European Union) thus the euro will come out with some good news soon.

    Let's say you get wind that the French are going to leave Europe and become part of the USA. And that all of France is going to march single file into Bakersfield, California, becoming Americans.

    Maybe you think this will cause the euro to attract buyers.

    And that the globe may dump (sell) the USD in a mass panic.

    Therefore, you feel certain the exchange rate (of EUR/USD) will be going UP because everyone is gonna BUY euro. And it's OK with them that they SELL the US dollar.

    What do you do?

    Well, you could SELL euro/buy USD in order to take the contrary side (probably what I would do) because you realize that the market always loses, that is, the great majority of market participants lose their money because they are wrong about everything.

    You could BUY euro/sell USD in order to go with the short-term fluctuation upward, crossing your fingers that it will work out. I'll be there with my hand open when your stop loss is hit. :D

    Or you could open both buy and sell trades at the same time to take advantage of ANY movement in the pair. I do this too. It's a good way to make money.

    Yes, in the spot or cash market, by default, you MUST buy one currency / sell the other currency in the pair.

    Currencies are always paired. Think MFST/YHOO. Buy one / sell the other. Sell one / buy the other.

    That is, when you SELL one you are automatically BUYING the other. And visa-versa.

    If you fund your account in USD then, for example, when you open a trade your capital will be converted into euro (buy position) in the open market, or if you short euro (buy USD) (since you are trading that particular pair) your capital in the trade will be converted into USD in the open market thus allowing you to take advantage of the dynamic exchange rate fluctuations of the USD directly.

    If the last paragraph is a bit complex to you, don't worry. Try asking a broker's definition of it. :D They may give you a different, more accurate explanation.

    Look up "parity," or "parity value."

    If you want to try out a currency trading simulator (identical to a live account in all regards) that quotes you LIVE market rates click on my profile and read the info.

    Any other questions, please ask.

    Good luck,

  8. lasner


    I'm just looking for more markets to trade. I use Elliott wave to trade and am looking to find more markets that follow this pattern.
  9. Well if you do go to Forex, I have one statement I can make clearly..... do not go to FXCM. That is where I went, and the experience was horrible. I still have 49.90 in my account, and haven't touched it for a while now :p

    My main gripe with Forex... there are very very few good brokers, and it is not regulated and scalping is frowned upon which is what I'd like to do.
  10. JM,

    Are you saying that opening/closing a trade in a few seconds, nailing a point or two and doing this 50 to 100 times+ a day is "frowned upon?"

    #10     Mar 26, 2006