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When you decide to close a position,
deposit sum that you originally made is returned to you and a calculation of your profits or losses is done. This profit or loss is then credited to your account.
Investment Strategies: Technical Analysis and Fundamental Analysis
The two fundamental strategies in investing in FOREX are Technical Analysis or Fundamental Analysis. Most small and medium sized investors in financial markets use Technical Analysis. This technique stems from assumption that all information about market and a particular currency's future fluctuations is found in price chain. That is to say, that all factors which have an effect on price have already been considered by market and are thus reflected in price. Essentially then, what this type of investor does is base his/her investments upon three fundamental suppositions. These are: that movement of market considers all factors, that movement of prices is purposeful and directly tied to these events, and that history repeats itself. Someone utilizing technical analysis looks at highest and lowest prices of a currency, prices of opening and closing, and volume of transactions. This investor does not try to outsmart market, or even predict major long term trends, but simply looks at what has happened to that currency in recent past, and predicts that small fluctuations will generally continue just as they have before.
A Fundamental Analysis is one which analyzes current situations in country of currency, including such things as its economy, its political situation, and other related rumors. By numbers, a country's economy depends on a number of quantifiable measurements such as its Central Bank's interest rate, national unemployment level, tax policy and rate of inflation. An investor can also anticipate that less quantifiable occurrences, such as political unrest or transition will also have an effect on market. Before basing all predictions on factors alone, however, it is important to remember that investors must also keep in mind expectations and anticipations of market participants. For just as in any stock market, value of a currency is also based in large part on perceptions of and anticipations about that currency, not solely on its reality.
Make Money with Currency Trading on FOREX
FOREX investing is one of most potentially rewarding types of investments available. While certainly risk is great, ability to conduct marginal trading on FOREX means that potential profits are enormous relative to initial capital investments. Another benefit of FOREX is that its size prevents almost all attempts by others to influence market for their own gain. So that when investing in foreign currency markets one can feel quite confident that investment he or she is making has same opportunity for profit as other investors throughout world. While investing in FOREX short term requires a certain degree of diligence, investors who utilize a technical analysis can feel relatively confident that their own ability to read daily fluctuations of currency market are sufficiently adequate to give them knowledge necessary to make informed investments.
Rich McIver is a contributing writer for The Forex Blog: Currency Trading News. Learn more at http://www.forexblog.org .
