Trading Currency Blog

Asoka Selvarajah asked:


Forex Trading is catching on like wildfire amongst private traders, and there are good reasons for it. Forex is the largest known financial market in the whole world, and the most liquid to trade in. Also, the requirements to open a currency forex trading account are much less stringent than for stock trades.

The term “Forex” is short for Foreign Exchange. The daily turnover in currency markets is currently $1.9 TRILLION dollars. Amazingly, this is over TEN times the average daily turnover of ALL the global equity markets put together. It’s more than 40 times the daily turnover of all securities on the New York Stock Exchange.

So what is Forex? In layman’s terms, Forex trading means the simultaneous buying of one currency and the selling of a second currency. In other words, the currencies are traded in pairs, i.e. one currency traded for another.

Interestingly, only 5% of the turnover in daily forex currency trades comes from companies and governments buying and selling products and services from foreign countries. These entities then engage in forex trades in order to convert their foreign currency profits back into their respective domestic currencies. Amazingly, the remaining 95% of turnover is pure speculation, i.e. forex trading entirely for profit!

If you’re new to FOREX currency trading, familiarize yourself with the most liquid currencies. These are the most traded, and where you stand your best chance of trading success. They include the US dollar, Euro, Japanese yen, British pound (also nicknamed “Cable”), Canadian dollar, Swiss franc and the Australian dollar.

The good news for small traders is that the Foreign Exchange Markets cannot really be manipulated. Their enormous size and liquidity, as well as the fact that forex markets are not under the jurisdiction of any one country means that no single investor can usually hope to move a major currency market in a serious manner (of course, there are always rare exceptions and George Soros’ famous exploits in taking the British Pound out of the EMS is a famous and extremely rare exception to the rule).

Forex Markets entertain a wide variety of participants with varying goals. Some enter the market with a long term investment goals, while other are day traders acting for the extremely short term only.

Forex trading, involving foreign currencies on an exchange, is not centralized. It takes place via telecommunications. Also, currency trading is open twenty four hours a day. Currency dealers will quote all the major currencies in every time-zone in the world.

Forex currency trading can be an extremely rewarding business, provided you thoroughly know what you are doing. However, like any other business there are always risks (and potentially disastrous ones) for the novice who foolishly dives in without thorough preparation.

Where there are risks, there are also rewards. The upside potential, with limited downside risk (provided you know how to place trades with discipline and exercise excellent risk management) can be enormous.

Hence, in order to profit from trading in Forex, it is critical that you become an excellent student first and really STUDY forex markets in particular and good online trading principles in general. The Forex markets lend themselves particularly well to Technical Analysis, i.e. forecasting via price charts.

Some general awareness of current events around the globe, be it political or economic, is important in order to understand underlying driving forces. However, don’t get too **** about this and focus your time on the hot air voiced by self-appointed economic market experts on business and market programs. Most of them know nothing about the process of trading itself, and their opinions are often plain wrong.

In conclusion forex trading can be a very attractive and highly profitable business. You can trade currencies very profitably from home and, depending upon your trading knowledge and appetite for risk, the sky’s the limit as to how much you can make. However, be prepared in advance to invest a large amount of time and practice before you start to make money from forex trading on a consistent basis.



FRITZE

Daniel Church asked:


Forex market trading is trading currencies worldwide. Just about every country in the world are involved in the forex trading markets, where money is bought and sold, based on the value of that currency at the particular time. As some currencies are not so strong, it is not going to be traded heavily, as the currency is stronger and worth more, more investors and traders are going flock to invest in that market at that particular time.

Forex trading takes place twenty four hours every day, where about two trillion dollars exchange hands every day. That amount of money eclipses other investment markets such as the stock markets and the futures markets. For example, the US stock market trades about 200 billion dollars everyday, while the commodities markets trade over 400 billion dollars each day. These figures give a good picture of how large and liquid the forex market is.

The currencies that are traded on the forex markets are from countries all over the world, though most of the investors’ trade on a few major currencies such as the US Dollar, Euro, the British Pound, the Japanese Yen, the Swiss Franc, as well as the Australian and Canadian Dollars. Every currency has it own three-letter symbol that will represent the particular currency that is being traded. For example, the Japanese Yen will be shown as JPY, the United States Dollar will be shown as USD, the Euro is EUR, and the British Pound will be displayed as GBP, while the Swiss France will show as CHF. You can trade among many currency pairs in one day, or you can just trade only one currency pair. The advantage of trading forex is there is not that much currency pairs to keep track of. Compare it to the stock market where there are thousands of different companies that offer their stocks in the market. Trying to research even a small number of all the companies listed will take a very long time.

Getting started in forex trading is not hard. In fact, setting up a forex trading account costs less than setting up say, a stock trading account. Many forex market makers allow individuals to create a trading account for only $300. The reason this is possible is because forex trading involves a lot of leverage, more leverage than other investment markets. The leverage can start at 100:1 and can get as high as 400:1. This means you can control a large amount of currency with a smaller capital outlay. For example, in a 100:1 leverage, you can trade $10,000 amount of currency using only $100. Though it needs to be reminded that though the use of leverage can generate high returns, it also means that it can cause spectacular losses. What’s more important that minimum account size, however, is to get educated in forex trading, such as learning technical trading tactics and keeping track of forex news.

Another advantage in trading forex, and a very important one at that, is the absence of brokerage fees. Over time, this will save you a lot of money, especially having in mind that forex trades are executed regularly. All said, forex trading provides a proven method of making huge profits, as long as you keep an eye on the pitfalls and get yourself educated.



BERNARD