Current language:  English  

Currency Exchange Rates

Foreign Currency Exchange

Foreign Currency Exchange: So Easy a Caveman Could Do It?

p> Foreign currency exchange trading may seem like a complicated affair. And it’s true that there are a lot of moving parts to the giant, multi-trillion dollar beast we call the forex markets.

Nevertheless, foreign currency exchange is, at its heart, so easy a caveman could do it. In fact, taking a caveman’s simple-minded approach to forex exchange rates and the FM markets can be an instructive experience. Let’s do that now.

Forex Trading In Ancient Times

Foreign currency exchange trading is the practice of trading one thing for another thing in hopes that the value of the newly acquired thing will increase in value compared to the original thing that you had.

This forex trade practice can be dated back centuries, maybe even to a time before money existed. A man trades a fishing pole for a wheel and then trades the wheel for a horse while the fishing pole would not have gotten him the horse. Brilliant!

Now, maybe the horse will allow him to trade for something of even greater value, especially if there is more demand for horses due to some external factor, such as the discovery of another tribe to trade with, and horses can carry the goods that far.

Looking at currency trading strategies with this simple-minded viewpoint will drill into your head the most basic of foreign exchange concepts, a rule that yields everlasting results:

Exchange into things you want, and out of things you don’t want—and always, always, always look for catalysts that can change the value of the things people want and need.

Speculation in the FX Markets: Vegas, Baby, Vegas

In today’s foreign currency exchange markets, there are two basic reasons for exchanging one currency for another:

1.  To purchase goods, services, or assets in a foreign country

2.  Speculation

Although there is certainly a component of global trade that moves the FX markets, you must never underestimate the reality that millions upon millions of traders are gambling in the FX markets at any given moment.

Speculation, and speculative mania, drives these markets. People are trading money to make money and you are now one of them. Accept that, with all the visceral, logic-destroying feelings that go along with that.

Realize that trading one currency for another is a contact sport that may lead to injuries. The pit bosses in Las Vegas all seem like such nice guys, but generally aren’t.

Forex Trading As a Method of Sleep Deprivation

The third caveman caveat to note about foreign currency exchange has to with the idea that human beings need sleep in order to function correctly, and the FX markets are pretty good at denying you sleep to the point where you make bad trading decisions.

And/or have a generally unhappy life.

Unlike the stock exchange, forex is a marketplace that is open around the globe and around the clock. The upside of this is that the increased hours of operation allow for flexibility in your schedule as a trader. Someone with a steady job can come home and trade in the evening to supplement their income, for example.

The dangerous aspect of the increased hours of operation is that, well, there’s no limit to the amount of trading you can do. There’s no set time during which you might as well sleep because the markets are closed.

When you don’t sleep, you will most likely not have good trading sessions, nor, as noted, a good life overall. Look it up. It’s a fact of physiology that lack of sleep causes problems.

A Caveman’s Guide to Trading the Foreign Exchange Markets

By taking a simple-minded approach to the foreign currency exchange markets, you can identify some simple things that you can do to make yourself more successful as a forex trader. To borrow a ubiquitous cliché, “There’s no need to reinvent the wheel.”

If you can understand that FX trading is all about trading for things that are likely to go up in value and out of things that are likely to go down in value, and then you can realize that FX trading is not that unlike gambling, and then you can make sure that you don’t let the forex markets deny you sleep, you can succeed in forex trading.

Sometimes it really is that simple.

Important Forex Information

The most important step in currency trading is finding the right broker; our forex experts can help. See our
reviews of forex brokers for more information.  arrow

Foreign currency exchange trading is the practice of trading x for y in hopes that the value of y will increase. Learn the basics of foreign currency exchange rates.  arrow

There are many excellent foreign exchange calculators available for free on the Internet. Let us tell you how to choose a currency exchange calculator.  arrow

Unfortunately, far too many beginning traders start trading FX without spending the time to gain necessary knowledge. Find out what you must know about exchange rates.  arrow