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Fun Foreign Exchange Facts

Foreign Exchange

Foreign exchange trading is ordinarily pretty heavy stuff. As traders we typically get up very early to analyze the markets. We tear our hair out over even the most fractious of price movements and we go through the whole spectrum of emotions as our trades tease and taunt us, zig-zagging between our stop loss and take profit orders. If just for a few minutes, you’d like to take a quick breather from frolicking with fractals or engaging with Elliot waves, then check out these interesting facts about the foreign exchange…

Fun Little Foreign Exchange Facts

  • Why Are Market Trends Referred To As Bulls & Bears? When a market is trending upwards, it’s known as a bull run or a bull market. When the markets are negative and downtrending, this is referred to as a bear market or run. Why? The bulls and bears are purely symbolic and arise from how each animal tends to attack its prey. What does a bull do when it’s face to face with a foe? It charges head on and thrusts the doomed animal upwards with its horn – in much the same way as voracious uptrend propels furiously upwards. An irritated bear, should you ever be unfortunate enough to come face to face with one, will stand on its hinds and swipe and claw at you in a downwards fashion. In financial markets this represents an aggressive downtrend.
  • Technical Analysis Is Often A Self Fulfilling Prophecy. Successful foreign exchange trading, particularly for scalpers, day traders and short term position traders is largely dependent upon the application of technical analysis. However, did you know that in some ways technical analysis works because it is self fulfilling? This means, when lots of people all see the same support and resistance levels – when they all plot the same trend lines and see the same divergences…they will all respond in unison, meaning that price is bound to react in the expected way. Technical analysis therefore becomes a self fulfilling prophecy!
  • The Dollar Is King. In the foreign exchange world, the US Dollar is involved with about 9 out of every 10 trades. Since its inception, the Euro has been the next most heavily traded currency – the Euro Dollar of course is the most popular currency pair. The high liquidity makes the Euro Dollar the cheapest currency pair to trade too – most brokers will provide their lowest pip spreads for this currency.
  • Many Profitable Forex Traders Don’t Know Much About How The Foreign Exchange Works. It’s true – many forex traders only understand a skeletal outline about the fundamentals behind currency price movement. This is because almost all the information required to analyze and predict price movement is contained within the forex charts – hence most forex traders are technical analysis masters.
  • Currency Obeys Technical Analysis More Purely Than Other Traded Financial Products. Here’s a fun little fact that should encourage you if you’re thinking about taking up forex trading – technical analysis works better within the foreign exchange market than in other financial markets such as stocks, options, bonds, futures (etc). Typically, a currency pair will largely observe key technical analysis points such as resistance and support strongholds. It does mean that those who are competent with technical analysis can fare much better in the forex market than others, such as stocks or bonds.

Now that you’ve got a few tid bits to entertain your fellow trading buddies with it’s time to get back to  your trading screen – those pips aren’t going to magically jump into your trading accounts by themselves you know!

 

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