Forex
The Foreign Exchange Market
FOREX, also known as FX or spot market, is the foreign exchange market. The foreign exchange market is where foreign currencies are traded. This is the largest market in the world, with an average of $1.5 trillion exchanged every day. Compare that to the New York stock exchange that trades about $25 billion a day, the FOREX market is almost 100 times the size of the NYSE. FOREX Trading allows you to take a position in one currency relative to another currency. Once you have established this position you will make or lose money as a result of fluctuations in the price of the two currencies. The foreign exchange market is not new it was founded in 1971. When the United States abandoned the gold standard back in 1973, its currency value began to be set by supply and demand.
Currencies from all over the world, e.g., the Yen, US Dollar, British Pound, Euro etc., are traded on the foreign exchange market. The foreign exchange market is not centralized, that is to say you cannot go and visit the exchange in the same way you would go to Wall street to visit the NYSE. All trading on the FOREX is handled with the help of the Internet, telephones and computer terminals all over the world. The key players in foreign currency exchange are governments, banks, corporations, investment firms and individual traders.
What is the most popular method for individuals to participate in FOREX? Online FOREX Trading has provided a means for the average investor to trade the market. There are many brokerage firms that offer trading in the foreign exchange market. Finding a suitable FOREX Broker will be one of the first challenges you will face. You will have to evaluate each broker to determine which one best serves your needs; there are differences between the services provided by various brokers.
When you have learned about the various methods of trading the FOREX it will be time for you to choose a FOREX Trading System. The trading system can be one that you have developed yourself or a pre-developed one that has been successful for other traders. Determining your trading system is the most important factor in determining if you will be profitable in FOREX Currency Trading. Your trading system will signal when you enter and exit trades and the amount of risk you are willing to take. When evaluating trading systems you will test your system by trading in a demo account using imaginary money. Although trading a demo account is not like trading real money, it will give you a chance to test your system, work out the bugs, and allow you to test your brokers trading platform.
The FOREX market is traded in currency pairs. You trade by buying (taking a long position) or selling (a short position) a certain amount of a currency in terms of another currency in anticipation of the currency price going up or down in relation to the other currency. After a movement in price has occurred you close your position by buying or selling your currency to achieve a gain or loss. Foreign exchange rates, except that of the Japanese Yen, are quoted out to four decimal places. The last decimal place is referred to as a price interest point or pip. Currency movements are stated in terms of pips. Thus, a currency pair moving from 1.0000 to 1.0025 would be said to have moved 25 pips.
There is a variety of FOREX Software available to assist you in your trading endeavors. The majority of this software is commonly referred to as trading platforms. This software will allow you to interface with your online broker and place trades. Most software will show you a FOREX Chart in many different time intervals. The brokerage firms offer many different types of trading platforms so you will be able to choose the one that gives you a good level of comfort.
If you find yourself completely lost in the world of FOREX there are many businesses and brokerages that offer FOREX Training. If you have properly prepared yourself with a good brokerage firm, learned some of the keys to foreign exchange trading, and established a trading system and tested these strategies using a demo account you will be ready to trade the FOREX.