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Forex Trading Tips, Techniques and Strategies

Forex is the foreign exchange market and measures the relationship between currencies. A currency can be viewed as economic indicator of a countries economic strength. The forex market reflects the relationship between countries. Traders all over the world look at these relationships and place trades that hope to capture the price movements between currencies. These traders are either long or are shorting the market. This ability to trade both directions without penalty is attractive for many traders.Currencies are traded as pairs and each part of the pair represents a country. The USD/CAD currency pair shows the relationship between the US economy and the Canadian economy. All commodities are bought and sold in US dollars. Because of this relationship the US dollar is the worlds reserve currency. Non reserve currencies will usually move in the opposite direction to the dollar. This inverse relationship can be exploited by currency traders.Say the dollar devalues through excess money printing. Wealth is transferred from cash to assets that will hold their value. This protects the owners wealth. As the dollar declines the prices of commodities rise in relation to the number of dollars now needed to buy them. This allows you to trade by shorting the US dollar and by keeping your money safe by buying commodities. Another way forex traders make money is on the difference between interest rates. This is called the "Carry Trade" and involves borrowing money from low interest rate countries and investing this borrowed money in a country with a higher bond yield. The difference between the bond yields are the profits on the trade.

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