Forex Currency Exchange Rates: How Do They Work?

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Every country or region around the globe has its own currency and these currencies have their values in relations to one another, they are known as the forex currency exchange rates, where forex stands for foreign exchange. The rates or the price between and two currencies or the currency pair, is based on supply and demand and fluctuates day by day and in some cases, the movements can be quite volatile.

With these volatile price movements comes the opportunity to profit by buying a currency will it is priced low and then selling in when it is priced high or at least higher, the difficult part of course is knowing when to buy and when to sell. Forex trading is big business and literally trillions of dollars are exchanged on the world markets every day, so much so in fact, that it makes the worlds stock markets seem small by comparison. The practice of forex trading is carried out by banks all over the world, as well as by many hedge funds on behalf of private investors.

Forex trading is more of an art form than a science and there are no schools or universities that can give you a qualification that means you can then go on to become a successful forex trader. There are of course many successful traders in the world, many willing to share their methods and systems, but amongst these successful traders, there are different methods and some will even contradict each other. For these reasons, it is not always an easy path to become a forex trader.

Although there many different methods to trading the market, too many to count or keep track of, not to mention the fact that are constantly evolving with new technology and software programs, there are still two distinct groups within the forex trading community. The first group will tell you that price movements and changes in value depend on government economic policy and economic data surrounding that currency. Traders under this belief will look at key economic date such as GDP, unemployment figures and interest base rates. The other group will choose technical analysis of charts over financial information, and attempt to extract information about future price movements from graphs showing price movement in relation to moving averages and previous highs and lows to name a few. There are no right or wrong answers, just successful and unsuccessful traders.

Source by James C. Feldon

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