Understanding Forex Trading

Understanding Forex Trading

Trading Knowledge Base
These tutorials cover basic to advanced topics about trading, the articles focus on trading features and markets offered by brokers while the reviews look in depth at individual brokers.
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Understanding the Forex Market

At its simplest, the Forex market is composed of traders and markets. However in between is technology to allow the trader to interact with these markets, provided by a broker. For most brokers on this site, this happens as CFDs, which are contracts between the trader and the broker based on the market to be traded (meaning the trader does not own the asset the contracts are based on).

When a trader starts to get involved in trading, these tasks become evident: to try and understand Forex trading and Forex and other markets and to find a broker. As the trader continues, these issues can continue, as the trader seeks to find new approaches to trading. This page seeks to provide information about these topics. The rest of the site has ways to compare brokers with each other, to try and find the right one.

The articles are divided into those about trading and those about brokers and are followed by broker reviews. The articles about trading aim to examine issues in trading, focused on various themes. The articles about brokers, aim to examine in detail offerings of brokers, based around markets and ways of trading. The reviews take a look in more detail at individual brokers. The core topic is Forex, however the articles have expanded to look at other markets, in particular cryptocurrencies, offered by Forex brokers.

Why are the articles called tutorials ? Because they seek to gain an understanding of issues in trading in an open way, raising ideas, like a tutorial. They accept that formulae for trading are problematic, for various reasons, including that the market changes and is subject to so many influences such that it breaks down rules and approaches based on rules, and analysis based on repeated patterns. This is a common experience in trading, so rather than laying down more rules sets, the tutorials seeks to look at what the market is, to the extent they can do this, and make statements about this, for example about Forex trends. This said there are trading approaches, which aim to try and work with regularities in the market.

An interesting thing about trading, is that clear patterns can be seen (and more generally regularities). However a reading of the chart is a reading of the past. It needs to be considered that each moment in the chart a series of possible outcomes may have happened. This can be seen when making a trade (i.e. in the present) and noting that the expected pattern does not play out and maybe turns into something different. So each moment in the chart can be seen as actually consisting of many possible alternative outcomes. Market events, what happens now, help create the actual set of outcomes, creating the chart.

However, there are features of a chart which may help narrow the set of possible outcomes, creating regularities. These include values such as the big figure, and halfway between a big figure. What happens though at these repeated value levels, is also unpredictable. It also includes liquidity events, such as market open and closes, and of course news events. However even in these constrained situations, the market is still in effect unpredictable. But it can be helpful to know why the market may have moved the way it did.

Trading then can be seen as the search for market information (gleaned from past events) which indicates that there are constraints on the market limiting the number of outcomes, constraints which can result in a pattern emerging, for a pattern itself consists of different outcomes, it is just one which has tradable direction somewhere in it. To do this, requires an understanding of the Forex market and arguably also an understanding particular to any other market of interest, though commonalities can be expected across markets.

Cryptocurrencies present an interesting problem, in that they are very new (unlike most other markets) and are functionally complex. It is not so hard to understand how Gold works, for example, or a Forex pair. However Cryptocurrencies have a complex functionality as they are computer algorithms, operating on the Internet, which can be relatively easily changed in many ways, creating new cryptocurrencies. They can have certain features such an decentralised payment processing, a way to incentivise payment processing without the need to direct anybody and no central authority creating the currency. Whether it is necessary to understand them is an interesting question, however this page does examine a range of cryptocurrencies offered by various brokers.