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Let’s say you’re traveling to the United States from the UK. When you arrive at the US airport, you’ll notice there are tens, if not hundreds, of different “currency converters”. When you approach these machines you see that you can insert the GBP currency you brought from the UK and have it exchanged for US Dollars, the countries native currency. When you insert 1000 GPB, you notice that in return you’ve just received around 1300 USD. You think to yourself, “Why did I just receive more than I put in?” Unknowingly, you’ve just swapped currencies through the foreign exchange market, a form of the financial markets, where assets or valuable have varying & alternating prices.
The financial markets are various and littered with opportunity. Learning how to trade Forex markets, for example, can be an invaluable skill you utilize for the rest of your professional career. Understanding their core and learning how to maneuver through them is under no circumstances an easy task, but if done, can produce a jaw-dropping profit. This guide will overview how to trade the foreign exchange markets, how to set up and get started with simple Forex trading accounts, and the basic fundamentals of the process.
The foreign exchange (Also known as “Forex” and “FX” Markets) markets are often considered one of the most globally acknowledged markets because it is the most liquid market in the world, and generates more volume than any other market. Additionally, Forex Markets are technically considered to be 24/7 markets, unlike equities where you can only trade 5 days a week, depending on which currencies you trade.
What is the Forex Market?
This guide will dial in on Forex Trading, which is conducted on the Forex Market.
While this is more paraphrased, the bottom line is that trading is not easy. However, if you dedicate a serious amount of passion and effort to grasping this knowledge, which also means reading and following this guide meticulously, it is, *not guaranteed*, but absolutely possible to make vast amounts of money from trading markets.
The Forex Market as a whole is simply a place where people across the globe enter in transactions with one another to buy and sell certain global currencies. Let’s apply the previous example used of walking into an airport and exchanging your GBP from USD in order to use it for purchases in the United States. In a very simplified sense, this transaction was conducted on the Forex Market. The Forex Market is one of the largest markets in the world with an estimated over $5.1 trillion in market capitalization calculated per day.
The Forex Market is a compilation of the world’s acknowledged and regulated currencies. There are some exceptions as well; assets such as “cryptocurrencies” are not included in the classification of the Forex Market. The Forex Market is a common outlet for traders; people who buy and sell assets for a profit. You may have heard of stories of people getting rich by trading Forex. While this is true, getting rich by trading is entirely subjective.
Forex trading has birthed a new-age market where anyone with a phone and valid identification can get started. But what is Forex Trading? Breaking down the concept, the term is composed of 2 words which need to be understood prior to any action.
Forex- Forex is short for “(for)eign (ex)change markets”, which is the financial markets reflecting the buying and selling of global currencies and their respective pricing on a global level.
Trading – Refers to the financial action of buying and selling assets (In this case of global currencies) in a consistent manner in hopes of realizing a profit.
Taking these terms into account, Forex trading refers to buying one currency and selling another currency at the same time.
As we mentioned briefly in our Forex terms section, currency pairs are two currencies that are being exchanged for one another either in a cyclical or expansive manner. Within Forex, currency pairs consist of 2 currencies: a currency that is being bought and a currency that is being sold. Pairs are denominated by respective currency tickers, which as also aforementioned, are represented by a finite amount of letters. Currency pairs adhere to the following format: “Currency 1” / “Currency 2”. The slash represents their pairing.
While brokers will yield the tools you need for exact trading, Google has multiple tools built in its infrastructure that is tailored for forex market trading. For example, typing in any currency pair will return the most recent conversion rate for those two currencies. In the above example, typing “USD/JPY”, or United States Dollars converted to Japanese Yen will return the last retrieved conversion rate, which is at the moment 111.91 Japanese Yen per US Dollar.
Let’s dissect a currency pair; what does a currency pair tell us when we’re potentially looking to buy, sell, or trade currencies? Look at the following currency pair:
This case is translated to New Zealand Dollar by United States Dollar, or in the world of currency trading, it’s referred to as the “kiwi dollar”. If we were to sell NZD/USD, you would be selling the New Zealand Dollar and buying the United States Dollar. Now let’s say we were buying NZD/USD – this would mean that we are buying the New Zealand Dollar and selling the United States Dollar. What does this mean in terms of sentiment? If we are simply buying NZD/USD with no associated orders, we’d essentially want the price of the New Zealand Dollar to increase relative to the price of the United States Dollar. If this is the case, our position will be more valuable. If the opposite happens, our position will decrease in value. Let’s take the opposite order in this currency pair that we mentioned: let’s say we sold NZD/USD and didn’t have any positions to sell, then we’re entering a position similar to ‘short selling’, however, this is a more complicated topic that won’t be discussed here.
Having trouble identifying which pairs link to which world currencies? There are a plethora of resources available that can be used to find either a pair relative to currency or currency relative to pair. Bloomberg has a great portal for this, however, you can also do a quick Google search for currency pairs.
What are the Most Traded Currency Pairs on the Forex Market?
The most common currencies on the Foreign exchange markets are the United States Dollar (USD), the Japanese Yen (JPY), the Euro (EUR), the Canadian Dollar (CAD), the New Zealand Dollar (NZD), as well as the Pound Sterling (GBP). The trading pairs that have been deemed the largest due to their consistency and large volume in daily trading are as follows (Not in order, as they change the order of most volume obtained daily):
USD/CAD, EUR/USD, GBP/USD, NZD/USD, AUD/USD, USD/JPY, as well as EUR/JPY, EUR/CHF (Swiss Franc), EUR/GBP, and AUD/CAD.
How to Read Forex Charts
Forex markets demonstrate exchanges between different currencies and their prices relative to that exchange. Understanding charts are very important and can be an extremely useful tool in trading Forex. Prior to learning how to read them and how you can use them to make money trading, you should understand what exactly goes on in a forex market chart.
Charts Are Relative to a Parameter – Foreign exchange market charts are always relative to a certain parameter. The most basic chart type in Forex, which you’ll also be using the most, is the standard line graph. A line graph houses two axis, the X-Axis, and the Y-Axis. Charts demonstrate something. The most common chart, a line graph, shows the performance of one parameter over the length of a different parameter.
The most common chart in Forex trading is the performance of a currency pair over a said period of time. In this case, we can determine the following parameters are used to demonstrate a chart for how the price of a currency pair performs over time. The parameters used in this case are:
1.) The trading pair 2.) The exchange rate (price) of the trading pair, 3.) Length of time the exchange rate of the trading pair has been recorded. In the most standard and most likely used average format of this type of chart, the parameters are used in the following notion; on the Y-Axis, you have a scale that shows the prices that the trading pair has previously obtained. On the X-Axis, you have a start date for where the data recording starts, and then an end date for when the data ends.
Let’s look at the above chart of USD/JPY courtesy of DailyFX. At the title of each graph, you will have an overview indication of what it is you’re looking at. In this case, this is the chart for the price of “USD/JPY“, in other words, the amount of USD that can be exchanged for JPY over the period of a year. On the X-Axis you can see the time indications, which are marked by Months (Time).
Then as we previously mentioned, on the Y-Axis, we have the price points at which the USD/JPY pair has attained.
Now, let’s delve a bit deeper into the graph. The exact price points may simply look like the prices at which USD/JPY has obtained previously, correct? Yes and no. The above chart is one of the most used and probably most important chart type that you’ll come across, called a Candlestick Chart.
A candlestick chart is a type of chart that shows the performance of a currency over time through the form of “candlesticks”. Candlesticks are visual representations of price movements of an underlying currency from its open price, close price, as well as its price increase/decrease relative to the price of the currency on the previous close. This might sound confusing at first, but let’s dive in; candlesticks are a concept that can only be learned with practice.
A candlestick represents a singular time mark relative to the time preference you’ve set. If you open a “Daily” candlestick chart, each candlestick that you see on the chart will be representative of a “Day” of price movement. Let’s look at a zoomed in version of the USD/JPY chart, which looks like so:
Looking at this chart, each candlestick represents a “Day” of price movement for the USD/JPY pair. Each green candlestick means that on this “Day”, the price of USD/JPY closed higher than what it closed on the day before unless we are talking about the most present candlestick on a candlestick chart. In this case, the candle will be green or red depending on whether or not the price on a “Day” opens relative to the previous day. If it opens higher, then in realtime the candle will appear green.
The following image, provided by Investopedia, demonstrates the anatomy of a candlestick on a chart.
The topmost part of the candlestick indicates the highest price achieved by the pair during the day; the second topmost is which price the pair opened or closed the day at; the body of the candle extends only as far as the fluctuation in price during the day. The bottom of the body indicates the subsequent open or closing, and then finally, the bottommost part of the candle represents the lowest price attained during the trading period.
Analyzing these sorts of charts are necessary to get a better grasp for Forex trading but are also extremely necessary for learning how to maneuver any financial market. Learning the functionality and basis of a candlestick chart will be invaluable in your overall trading.
The second chart that should be understood is the basic line chart. With (Hopefully) newfound knowledge in Candlestick Charts, understanding basic line charts will be easy. Line charts are primarily useful in Forex trading for a preliminary overview of price action. If there are 4 trading screens open across your trading desk, you may not want to know the exact details associated with price action that candlesticks provide. Sometimes you simply want to know the general direction. Basic line graphs are excellent for that purpose.
A line graph displays data in a similar manner as a Candlestick Chart. A basic line graph/chart will overview the price of a certain trading pair over a certain time period. However, it will only ever demonstrate a singular parameter through the chart: which is the close price of the trading pair. Here is the same trading pair we viewed earlier with a candlestick layout, except now replaced with a basic line setup.
Here you can see we have a very broad overview instead of exact closes, opens, and daily movements, and sometimes that’s the only thing you want when looking at a trading pair. This chart is extremely simple in terms of composition: on the Y-Axis, we have the price of the range of prices the trading pair has previously attained, and then on the X-Axis we have our variable of time, which is in months for this specific graph.
Reading Forex charts is essential, and with this basic understanding, you should have the capability to make very brief and preliminary inferences, such as “This trading pair has been declining in price for over 2 months now”, or “This trading pair dipped down today after increasing for over 3 weeks, maybe now is a good time to trade upward.” Of course, nothing is set in stone, however, comprehending Forex charts will allow you to reach a level of knowledge in trading and analysis that can be very helpful in making profit.
How to Make Money Trading Forex
Making money on the Forex Markets is done through the form of trading by completing a variety of transactions in the market between currencies and accumulating profit through the price movements that are underwent everyday.
When trading Forex, you are purchasing one currency while at the same time selling another currency. You can make money in trading when you do one of the following:
- Buy a position that increases in value and then selling that position for a profit
In this case you’re betting that the trading pair you’re purchasing will increase in value.
- Sell a position on a trading pair that decreases in value (Similar to short selling) and then purchasing that position back after it has decreased.
In this scenario, you’re betting the trading pair you’re selling (Also known as borrowing) will decrease in value so that you can cover or “repay” your broker back at a cheaper price, therefore yielding a profit.
The following example will walk step by step how you make money with forex:
You open a Forex trading account with $1000 in it. You buy $500 and keep the remaining half of your account in cash (A wise strategy is never to empty your entire account into a single position) – the trading pair AUD/USD (Australian Dollar for United States Dollar) at .71 AUD (This means you’re purchasing $500 worth of Australian dollars using the United States Dollar).
For sake of argument let’s assume margin is not enabled, and let’s also say the price of AUD/USD increased to .72 which is equivalent to 1.4%. The next day we see this increase and we sell our $500 worth of the position; our $500 has increased by 1.4% (Not taking into account fees) which is approximately $507 total. $507 – $500 = $7 profit. In this case, you’ve just made money with Forex!
The difficult part and the sections that take dedication and time to master are determining the position size to take in your account when to cut losses, when to take profit, and so on.
Now, the million dollar question is which positions do you take in order to turn a profit on your portfolio? To make profit trading Forex, you look at that question with a very subjective perspective. There is no singular secret sauce that can prove profit in Forex trading, especially with the market at this large of magnitude, the market is a zero-sum game: when someone loses money, someone makes money and vice versa. Dedication and a sincere amount of diligence and work can return a profitable environment for Forex trading, however, and can increase the frequency at which you place profitable positions.
What is a Forex broker?
Let’s apply once again to our previous example of arriving at an airport in the United States with GBP. We want to exchange our GBP for USD so that we can use it in the country, so we go to a currency exchange at the airport. This currency exchange is an example of a broker. A broker is a provider of an asset, in this case, a provider of foreign currency, that will sell you something in exchange for a fee; this is where you go when looking for where to trade Forex.
At an airport, the currency exchanges are considered to be brokers. Let’s say we converted our 1000 GBP to 1300 USD and upon arriving back in the UK saw that we could convert our USD to 1050 GBP. We notice on a large scale we could theoretically continue this conversion all for a profit (In this case, of 50 GBP).
The fluctuation in price for all global currencies are consistently fluctuating; they are changing by the second. At the moment, 1 USD could be equal to 100 Japanese Yen, but that doesn’t mean tomorrow it will be worth that exact amount. As a result, trading has erupted on the mainstream as a potential for moving back and forth between currencies to obtain a profit.
The problem is, moving from country to country just to exchange currencies for profit is tedious, plus the fees required for flights, food, hotels, etc. would make economically no sense when applied for the profit potential available. As a result, Online Forex brokers, serve as portals where users can buy and sell currencies in their real-time value from anywhere in the world. Through these brokers, you can then buy and sell global currencies such as USD no matter if you’re at a United States airport, or in a coffee shop in the Netherlands.
How to Choose a Forex Broker (What to Look For)
Trading on the foreign exchange market can be an incredible opportunity to make profit straight from any technological device, however, the platform for which you trade Forex can be the difference between a winning and losing portfolio. Picking the right Forex broker and finding the right forex trading sites is essential.
- Look for a broker that matches your trading style: if you intend to use heavy amounts of margin, look into a broker with low margin fees.
- Brokers with high regulatory respect and connection is a great sign. The higher the security, the more safe and risk-averse your funds are with this particular broker.
- High liquidity and volume on a broker mean that there is a higher chance of your order being executed where you want it to.
- Find proper team members who have been well vetted through experience in foreign exchange brokerage.
Top Forex Brokers
CryptoRocket – CryptoRocket is a CFD broker allowing you to trade Forex. Traders will be able to choose between among 55 currency pairs and includes Major and Exotic pairs. Unfortunately, CryptoRocket is unavailable in the US, but it is very popular in the UK and Australia as well as several other countries. Its popularity can be linked to its ease of use and asset variety.
Plus500 – Plus500 is a regulated CFD broker that enables the exclusive trading of Forex CFDs, which are essentially contract representations of different foreign currency exchange pairs. Plus500 is not enabled in the US, however, it maintains a strong presence in the UK and AU due to its very sophisticated and user-intuitive framework.
80.6% of retail CFD accounts lose money
24Option – 24Option is an additional CFD brokerage that enables the trading of a variety of different Forex pairs. 24Option maintains an additional educational center that is available for new users and those looking to learn more about trading. 24Option maintains a large variety of different assets including cryptocurrencies, forex, and more.
OANDA – OANDA is one of the most used and trusted foreign exchange currency brokerage platforms in the world. The exchange offers very quick and guided registration that still requires verification, but is streamlined with a very responsive support team. OANDA runs a variety of different product offerings including Forex trading pairs for a variety of markets, and enables margin trading.
TD Ameritrade – Ameritrade, ran by the popular retail bank “TD”, is one of the most trusted trading platforms in the financial ecosystem. The platform is overseen by a plethora of different regulatory bodies and maintains a level of market safety that many other exchanges seem to lack. Since the exchange is operated by an actual registered bank, it offers a level of safety with traded funds that many other exchanges simply legally cannot provide. This edge is very attractive, especially to prospective Forex traders.
Types of Forex Trading Platforms – MT4 & MT5
Forex is the largest market in the world; there are trillions of dollars traded every day in Forex through thousands of different brokers and exchange platforms. There has been for quite some time, however, been a precedent for how you can fetch the best options from some exchanges and execute the security and safety of other ones. This standard is referred to as the “Metatrader” platform, which is a new industry base for integration on the majority of Forex brokers and exchanges. Finding a broker that doesn’t offer Metatrader support in some form or another is a rarity in today’s industry. Metatrader is the “MT” in any “MT(x)” acronyms.
Metatrader’s widely renowned platform made its breakthrough with MT4, or Metatrader4. The platform offered a streamlined and global opportunity for all traders to find ease in their currency trading. Then, in an attempt to release an “improved” version of the previously released platform, Metatrader released Metatrader5 (MT5). There are some varied opinions in the overall currency trading community when it comes to which platform reigns dominant. The most important point here: MT4/MT5 are not brokers. They are platforms that can link brokers to enable fast and efficient trading.
Considered by many as the optimal foreign exchange trading platform. MT4 is a free application on all platforms and enables trading through broker linkage. The platform has advanced charting tools that have been tailored for the global currencies market. Metatrader4 has features that were designed strictly with the global currencies markets in mind. While brokerages from third-party markets can, in fact, be linked, the basis was to create the platform for global Forex traders. With this in mind keep in mind the protocols of the underlying platform were also designed in reference to the currencies market.
After immense global success with MT4, the Metatrader brand decided to redefine their platform with Metatrader 5 which came with a plethora of new features and capability. This included new complex order types, integration for other markets supported by global brokers including stocks/equities trading, and much more. Overall, MT5 is a bit more complex. MT5 does not allow for hedging forex positions, however, which is a feature that MT4 does allow. Although this is a bit more complex and should traditionally only be derived upon advanced Forex trading knowledge.
Final Verdict: MT4 is the better, more basic option if you’re looking to trade foreign exchange markets. If you’re looking to get involved with more types of markets and want to utilize more complex order types, then MT5 may be the better option for you. MT4 is better for the beginner Forex trader; MT5 is better for the experienced financial market savant.
2 Types of Forex Trading Accounts
Forex trading is done through a variety of different accounts; this is relatively different than stock trading, as there are tailored foreign exchange market accounts created specifically for forex traders. *This does not take into consideration institutional-sized Forex trading accounts which are enabled at an even larger size* The following are the 2 most common types of Forex accounts:
These accounts enable you to trade lots in their standard form, which is equivalent to $100,000 per lot.
These accounts allow for trading of Forex in what is referred to as lots in their ‘mini’ form; otherwise, denominations of $10,000 per lot.
11 Important Forex Terms
1. Pips – Currencies are traded in the markets on a very specific and precise price point. As a result, the term “Pip” is used to describe a “(P)oint (i)n (p)ercentage” is utilized in Forex trading to refer to a percentage point change relative to the last price decimal point demonstrated in your quote. For example: if a currency is trading at 101.1111, and the value of that currency increases to 101.1112, the currency has increased by one pip.
2. Ticker – In the Forex market, you are trading assets such as the “United States Dollar”, the “Japanese Yen”, and many other wordy assets. Trading platforms do not have room to list all of these words, let alone their representations, so as a result, the Forex Market runs off of what is called “tickers”. Tickers are small letter representations of the traded asset. For example, in Forex trading we refer to the United States Dollar as “USD”, and the Japanese Yen as “JPY”. This saves an enormous amount of time but also eases the trading process and visibility on a variety of interfaces.
3. Pairs – Pairs are two currencies that are being bought or sold for one another. They are represented by the aforementioned “Tickers”. One of the most common trading pairs is “USD/JPY”. As you can tell, a pair is represented by a “/” to indicate currency 1 is being exchanged for currency 2 – in this case, the United States Dollar is being Exchanged for the Japanese Yen.
4. Market Order – In Forex trading, there are various order types, however, one of the two most basic and necessary to understand for beginners are market orders. Market orders are buy or sell directions that you place in the open market that will execute at the next available opportunity – that’s it. Market orders simply execute immediately when it is deemed the most efficient.
5. Limit Order – A limit order is the second most fundamental order type which executes a direction to buy or sell only upon a certain “price limit”. This can be best understood through an example: A limit order to sell the United States Dollar is created for $1.010 – this means that the position in the United States Dollar will only be sold if the price crosses $1.010. This applies for any trading pair. If a limit order is placed that instructs only to buy if the value of USD/JPY crosses 109 JPY per USD, this means the order will only execute and buy Japanese Yen using USD if the price of 1 USD crosses 109 JPY.
6. Order Queue – In the Forex Market, you create orders for positions; if you want to buy the Euro with United States Dollar (Which means you have a position in the US Dollar relative to Euros), you have to create an order that is sent to what is called the order queue. An order queue is simply a list of orders sent into the markets that have not been executed yet. The queue can be ordered by multiple parameters, traditionally by the level of the highest importance to least importance. This is all economically incentivized. The most profitable trade for the markets is traditionally executed first in an incentivized order queue; however, this is only a particular order queue. In a general reference, an order queue is simply a list of orders that have not been executed yet.
7. Margin – “Margin” or more specifically the term “trading on margin” refers to the process of completing trading or buying any asset by borrowing money from your broker. This is used to realize profits or losses faster. Margin can be useful to grow small accounts but should be used with caution as when it’s used if the position goes out of your favor, you can lose all of your money quickly. Margin is complicated and if you decide to use it, it’s best to research as much as possible about it prior; using a demo account to trade on margin is an excellent strategy.
8. CFDs – CFDs are an acronym for “Contracts for Difference”. A contract for difference is a financial product representative of simply an agreement to buy or sell said currency.
9. Stop Loss – In all markets, there are times where you don’t want to always be watching the market in case your position starts to lose money so you can sell it. Stop losses are order methods that allow you to tell your broker, “If my position starts to lose “x%” or crosses the “y” price level, sell my position.” Example: if I create a stop loss on my USD/JPY position for 10%, if my position starts to surpass losing any more than 9.99%, my position will be sold. This is also referred to as orders so that you can ‘cut your losses’.
10. Liquidity – The forex market is many times referred to as the “most liquid financial market”, but what does this mean exactly? In Forex liquidity simply refers to the speed at which a currency can be bought or sold. This is impacted by multiple parameters; however, the bottom line is that liquidity refers to the availability of an asset. Foreign exchange markets are the, subjectively, most liquid markets because they are the most accessible and tradeable because of over $5 trillion in daily volume.
11. (Bonus) Lots – Forex trading is in some cases completed through what are called “lots”, which are representative of 100,000 units of currency. 100,000 units of that currency are not required in order to open that though, traditionally there is a small margin requirement. Lots can be deducted into “mini” (Equal to 10,000 units) as well as “micro” (Equal to 1,000 units).
10 Tips for Trading Forex
Create a plan – too often, people start trading Forex without any purpose other than wanting to “get rich”, which is the most awful mistake a trader can make. That strategy has been tested millions of times, and in this case, you’re not treating the markets as a financial atmosphere but rather just as a lottery, and blindly throwing your money at random chance. While the probability of instances is absolutely integrated in Forex trading, create a plan beforehand of what your goals are.
Backtest – if you’re using MT4 or MT5 you can download backtesting plugins for it which can then allow you to simulate how your strategies would have performed in historical market conditions. This will give you newfound insight in the markets.
Learn how to use margin – margin allows you to borrow money from your broker and trade higher amounts at certain limits. This means you can gain money faster, but it also means you can lose money faster. Try to understand Forex and understand how its concepts can best suit you.
Limit and ration your account – placing your entire account valuation into one position that you have no idea will go up or down is a bad move. By looking at your account and seeing how much of a certain value you’d like to put into a position and controlling your balance is essential.
Don’t fall for “Get rich quick” Forex scams – Forex trading has attracted millions of retail users and subsequently there have been people who have claimed that by giving them money you can magically flip these investments into much more. Do your due diligence on projects or schemes that claim things that might seem too good to be true, because many times they actually are.
Follow global events – the foreign exchange market is relatively correlated to global occurrences. If the American economy goes into recession, history has shown that typically this means the value of the US Dollar decreases relative to other countries that are stronger. Stay up to date on global developments as this can help the accuracy and profitability of your positions.
Set stop losses and take profits – many traders, when getting into the markets, feel that when they see profits or losses that they will be able to simply determine when and how to close a position. This is many times disillusion; setting predetermined stop losses or indicating take-profit orders are essential. This doesn’t mean you can’t get creative with them (Say, for example, shifting orders), however, a profit no matter how small is always better than a loss. Finding the right forex trading brokers can help you gain more tools.
Find a strategy that works for you and stick with it – successful traders become successful arguably because they find something they’re good with and dial in on it. Test out different methods and see which one fits your style the best in terms of risk, and so on. While adopting and learning is never a bad thing, jumping from one concept to the next might not be the best idea as it would yield more profit by being an absolute expert on USD/JPY than being just a mediocre trader on 10 different trading pairs.
Don’t overtrade – in trading, there is the concept of “overtrading”, which is exactly as it sounds; trading too much. Don’t trade over your limit. Regardless of whether or not you’ve just pocketed 200% in profit or just took the biggest loss of your career, there are such things as winning sprees and losing streaks. Know to limit yourself.
Educate yourself on all things Forex – the more you learn about Forex, the markets, and associated technologies, the more edge you’ll have when it comes to trading. If you pocket over 100% on a trade but don’t know how to close it, you’ll never realize the profit.
This traditionally means that foreign currencies’ value is relative to increases/decreases to their economic weight. If the Australian economy were to tank at the same time the US economy were making leaps and bounds, AUD/USD would fall in value.