Page 25 - Ultimate Guide to Currency Trading

Keep in mind that relative values are for each separate currency pair. For example, the
Australian dollar might be moving in an upward trend against the U.S. dollar and in relative terms
getting stronger, therefore a short USD/ AUD trade would be best. On the other hand, the Australian
dollar might be getting weaker against another commodity currency, the New Zealand dollar. It might
be the case that New Zealand is undergoing rapid growth, growth that is stronger than that of
Australia. Not only might these fundamental elements be in play, but the technical elements might say
the same story. In this case the relative value of the AUD is less than that of the NZD, which would
warrant a short AUD/NZD trade. Each currency is valued relative to each other in units.

Looking for FX Pair Directions

In order to trade profitably, it will be necessary for you to get into the right currency pair, in the right
direction (long or short), before the rest of the currency traders of the world recognize the same
currency pair should be valued at the same price at which you are set to make a profit. In order to do
this effectively you should train yourself to look for and place your trades with an idea of the where
the overall market will be expecting the FX pair to be soon.

To profit by currency trading you will have to buy a pair at one price and then sell it at a higher
or lower price than you paid for it. To do this you will have to trade the expectancy of the market. This
is where the skill comes in with currency trading: looking for opportunities where a FX pair will be
moving soon, whether up or down. This determination is done with analysis of the fundamentals, the
technical indicators, or a combination of both.

When you are actively trading it is not always necessary to be in the market with active
trades all of the time. In fact, most professional traders spend as much time searching
fundamental information and performing technical analysis as they do actually placing
trades in their FX trading platform.

For example, as a currency trader, you might have spent the early part of the week monitoring
the news of the Swiss franc. After spending time on the Swiss National Bank's website, (www.snb.ch),
looking at brokers' reports, and looking at the charts (and related news) on Big Charts
(http://bigcharts .marketwatch.com), you notice that the Swiss franc has been gaining steadily against
the euro for the past eighteen months.

Looking into it further, you could switch to your trading platform and set up a technical
analysis chart. Currency brokers such as Windsor Brokers (www.windsorbrokers.biz) have trading
platforms that allow you to choose from a variety of technical indicators and imbed them right onto
your active trading chart.