Forex Market Guide

When you first get started in Forex, you will want a good glossary or dictionary. There are a number of terms you will need to understand and it won’t happen overnight. Keep that Forex glossary/dictionary by your side just as you would a dictionary if you were traveling to a foreign country and didn’t speak the language. In fact, forex is a foreign language, no pun intended, as it is trading currencies on the Foreign Exchange. In the beginning it will be enough to learn the way each currency is abbreviated. The most common currencies are the United States dollar (USD), the European Union’s euro (EUR), the Japanese yen, the Swiss franc (CHF) and the Great British pound (GBP). The one that usually baffles people is the CHF which stands for the Swiss franc. This actually translates to Confederation Helvetica franc. Oh well, so much for literal translations.

After you have learned the abbreviations for the most common currencies which are traded, the next step will be to learn about pairs. Currency pairs also have a language all their own as they are written as USD/EUR for example. Then each ‘side’ also has a name! The fist currency in the pair is referred to as the base while the second is known as the counter currency. But to make the language even more confusing, that base currency may be referred to as the notional or the face amount. Then the counter currency may also be referred to as the secondary currency. And this is just the tip of the iceberg! There are pips and longs and shorts and a myriad of other terms to learn. This is why every beginning Forex trader needs to treat Forex-speak like a foreign language. After all, it is!

Unless you are an extremely patient person, Forex grid trading may not be in your best interest. One of the most common mistakes that people make is not riding their losses. Since the object is to predetermine intervals at which you will be buying and selling, the key is to keep selling as you reach those gains, but ride the losses out. There is very good logic behind this in that there will come a point when those pairs gain again and you will actually make a profit. If you see that they have been dropping keep in mind that the market runs in waves; it fluctuates.

For example, you are riding the USD/EUR pair. For some reason your base currency (USD) has been losing ground against the EUR for a period of time and you start to panic. As a result you sell and just as you sell and buy USD/JPY, the EUR plummets and you could have made a killing. Now the same thing happens with the Japanese Yen and you have just lost more money. Patience is extremely important when grid trading. Because you are only buying and selling at very small intervals, you can sustain a loss over a period of time if you keep holding. The minute you panic and sell in order not to lose your entire investment is just when the market will take a turn. It happens all the time. It’s a simple law of averages. It is far better to watch trends for a bit and be patient than to panic and continue losing with every change in pairs.