FOREX Currency Trading
FOREX - Trading currency from around the world.
Basically, currency trading is all about trading one currency against another. It can be done over the phone or through Internet. Further, there are trading markets around the globe. England, United States, Japan, Australia and Germany are few of the countries that are active in the foreign exchange markets. As a FOREX currency trading novice there are a few terms that you need to become familiar with, here a few of these terms:
- Trend the general market direction, it can be either up down or sideways.
- Bear Market a market that is experiencing a prolonged period of decreasing prices.
- Bull Market the opposite of a bear market where prices continue to increase for a prolonged period of time.
- Fundamental Analysis the study of economic and political data for the purpose of determining future market movement.
- Long a position to purchase currency.
- Short a position to sell a currency.
- PIP the smallest incremental move a market can make.
FOREX currency trading has certain unique attributes that offer an unmatched potential for profitable trading in any market condition or any stage of the business cycle. Lets take a look at some of these attributes that makes this endeavor so popular today.
24-hour market: A trader can take advantage of all of the profitable market conditions at any time of the day; which means that there is no waiting for the start like the New York Stock exchange. This also means that you can pursue a trading investment during your non-working hours.
High liquidity: The FOREX market is the most liquid market in the world. That allows a trader to enter or exit the market whenever they want during almost any market condition.
High leverage: A leverage ratio of up to 400 is normal; compare this to a leverage ratio of 2 in the equity markets. Of course, this makes FOREX currency trading quite a risky venture. One has to practice good capital preservation in order to survive in the FOREX arena, not all trades will be winners.
Low cost per transaction: The average transaction cost is actually less than 0.1% under normal market conditions. You have to consider the spread when you are evaluating the numerous brokers in the FOREX business.
Always a good market: With all of the currency pairs available for trading one does not have much problem finding a trading opportunity. It seems there is always a bear market or bull market for one currency or another, and you as a trader can trade in either direction. That is to say, you can open a trade by either selling or buying a currency.
Inter-bank market: The foundation of the FOREX market consists of a global network of dealers that communicate and trade with their clients through electronic networks and telephones. There are no organized exchanges like in Futures, or the New York Stock Exchange.
No one can corner the market: The FOREX market is so large and has so many participants that no single trader, even a central bank, can control the market price for an extended period of time.
It is not completely unregulated: The FOREX market is seen as an unregulated market, although the operations of major dealers like commercial banks in money centers are regulated under the banking laws. For the average person who is willing to undertake FOREX currency trading, there is a higher gross potential than with any other trade type.