Free Forex Training What Is Forex Trading All About Anyway

By A Owings

Well, first and foremast , free forex training, like other speculation forms , has one very important goal that lies above all else ; make some money ! If this premise is what we start with , that making money is our goal , how is this achieved in our massive global market?

The first thing you need to decide is whether you're a fundamental or technical trader, or perhapse both . Later we'll have more articles on this topic , but we'll assume for now that you keep track of current events and world affairs and you are more attracted to fundamental trading . Then you have to ask, what are the single most important fundamental factors that drive currency movements ?

If the fundamentals is what you're focusing on , there is one thing above all else that will drive your forex trading decisions ; the interest rate differentials between various countries. You may wonder what an interest rate differential is? Good question ! Let us suppose that the Australian Dollar has a short term interest rate of 4% . This means that if you live in Australia and you're in debt this base rate helps to determine what you pay on your home mortgage, your credit cards, etc . Also, if you happen to be a creditor you can use this 4% short term interest rate as your base rate that decides how much your investments make; which can include certificates of deposites that come from a bank locally. Then suppose that the short term interest rate of the US Dollar, set by the Federal Reserve , which is 1%. So how in the world does what I just said affect currency movements ?

If the Australian Dollar short term rate is at 4% and the US Dollar short term rate is at 1% it's all as simple as this : investors will seek a higher yield on their investments and because they can get more interest in Australia they move their funds "down-under" or as the Aussies say, "down-unda mate" . This shift in investments of capital flows leaving the US and going to Australia mean that the US Dollar will weaken since demand is smaller than supply and the Australian Dollar will strengthen since the demand is greater than its supply. Economic fundamentals are working here ; when there is higher demand the value rises.

The next time you are thinking about your own free forex training and the next position to put on , just ask yourself , "what country is likely to have higher rates moving forward and which country moving forward will probably have lower rates ?" Then, buy the currency that you favor for higher interest rates and sell the currency that you favor for weaker interest rates and watch your profits grow as investors go towards stronger currency and leave the weaker one . This is the essence of free forex training.

Article Source: http://interpret.zar.vg

About The Author
Andy Owings - Author of the Drummond Geometry Daily Forecast for Forex Trading & Futures Trading. Andy makes specific trade recommendations every day for 8 popular forex and futures symbols. A free forex trading symbol is available on the website.