The market is open 24 hours a day, 5 days a week, to accommodate all of the time zones for all of the major players. Another completely separate but perhaps more important concern with trading in Forex is understanding how trade works in multiple currencies.
This means studying not only domestic market trends and currency values, but also those of foreign markets. With so many variables and volatile currencies being exchanged, how can you know a good buy or sell when you see one without complete awareness of the value of foreign currency. Of course, this will not be consistent down to the cent or fraction of a particular currency throughout an entire biness day, but at least you will have your starting point from which to begin, almost like North on a compass.
The base currency is ually expressed as a whole number, while the YYY position is expressed as the decimal that most closely matches the based currency rate. The smallest fraction, or decimal, in which a currency can be traded, is called a pip and this is ually the degree to which a cross-rate is expressed.
In one cross-rate expression example, one US dollar may be equivalent to 117.456 Japanese yen. Therefore, in the ratio above, you may hear that the yen is trading at .456, with no mention at all of the 117 whole yen that is shown in the ratio.
However, with the consolidation of most of the European market trading on Forex to the Euro, many currencies have been eliminated, making trade on Forex for other lands less complicated. Of course, you can only take advantage of such a situation should the commodity be traded in both currencies and both markets in question.
Such ideas will not seem so ‘foreign’, and you will be caught up and knowledgeable right along with the pros. The next chapter will explain more about ing the statistics that are published to forecast the next move on the stock market. In fact, sometimes the best first step to entering the market is to watch shows about it or read the financial sections of the newspaper that detail the trends and expected outcomes.
Volatility, or the tendency for fluctuation that can affect your earnings within the stock market, is typical within a domestic market but even more evident and much stronger on the Foreign Exchange Market. This makes any items purchased in the foreign currency more expensive for those trading in U. S. dollars, as the exchange rate is lowered.
The charter of the IMF (International Monetary Fund) assists in prohibiting such occurrences and enforcing the policy. However, what happens when the value of a foreign currency changes due to market fluctuation rather than purposeful reductions or increases by a federal government or federal bank? What effect do appreciation and depreciation have on the stock market.