DEC 20: Money Management Basics for Forex Traders
Money management in the foreign exchange currency market requires educating yourself in a variety of financial areas. First, a definition of the foreign exchange currency or forex market is called for. The forex market is simply the exchange of the currency of one country for the currency of another. The relative values of various currencies in the world change on a regular basis. Factors such as the stability of the economy of a country, the gross national product, the gross domestic product, inflation, interest rates, and such obvious factors as domestic security and foreign relations come into play. For instance, if a country has an unstable government, is expecting a military takeover, or is about to become involved in a war, then the country s currency may go down in relative value compared to the currency of other countries.
Before we go on, we should distinguish between the “primary” stock market and the “secondary” stock market. The primary stock market is where securities are created (by means of an IPO) while, in the secondary stock market, investors trade previously-issued securities without the involvement of the issuing-companies.