For active traders and investors, foreign exchange should be no different than other investment products such as equities, commodities or fixed-income. Due to globalization in the economic world and consolidation of whole economic regions (i.e., the European Union), including currencies in a portfolio helps to diversify assets and can reduce risk.

Just like other investment alternatives, foreign exchange offers traders/investors a market where they can buy or sell an investment product. In this case it is a specific Currency Pair. The currency pair may be the Euro versus the US Dollar, the US Dollar versus the Japanese Yen, the British Pound versus the US Dollar, the Euro versus British Pound, or a number of other currency combinations.

The different currency combinations represent nothing more than the value of one currency versus the value of another. That relationship is represented by a single price. In foreign exchange, the price of a currency pair is the market's expectations at the given time of the value of that currency measured against another currency given the current and expected economic and political situation in the two economies. In equity terms, which individuals are more familiar with it is the price of the stock.

Similar to equities there are other factors that determine the short term value of a currency product including technical analysis, short term supply and demand, seasonal capital flow patterns, the current price of the instrument and so on. It is these universal dynamics and topics that will move a currency's value up or down. By analyzing the pricing dynamics and combining that with sound money management and discipline, the investor can ensure greater success in his or her forex trading.