If you are a beginner in forex trading, this is the place to start. The following
articles will help you gain an understanding of the forex market and how it works.
What is forex? Why trade forex?
The foreign exchange market – or forex for short – is the buying and selling of
currencies, and it’s one of the fastest growing markets in the world.
Forex trading works much like it does with stocks, you buy low and you sell high.
The benefit of trading forex is that you don’t have to choose from thousands of
companies or sectors. Plus, you can make things even simpler than choosing which
company to buy.
For example, most people, even those that are new to forex, have an opinion on the
US dollar and the US economy. They can easily take their opinions and translate
them into a forex trade. Buying or selling US Dollars as simple as they buying or
selling a company’s stock.
Also, another advantage of the FX market is that it doesn’t begin at 9AM and end
at 4PM. Trading takes place 24 hours a day, 5 days a week. For most people 24 hour
trading means they can trade before or after work. Plus, you have the flexibility
to make your trades online.
Plus, you can buy and sell at any time, in up trends (also called bull markets)
and in down trends (also called bear markets).
What is Forex?
You may have noticed that the value of currencies goes up and down every day. What
most people don't realize is that there is a foreign exchange market - or 'Forex'
for short - where you can potentially profit from the movement of these
currencies. The best known example is George Soros who made a billion dollars in a
day by trading currencies. Be aware, however, that currency trading involves
significant risk and individuals can lose a substantial part of their investment.
As technologies have improved, the Forex market has become more accessible
resulting in an unprecedented growth in online trading. One of the great things
about trading currencies now is that you no longer have to be a big money manager
to trade this market; traders and investors like you and I can trade this market.
Forex in a nutshell
The Forex market is the largest financial market on Earth. Its average daily
trading volume is more than $3.2 trillion. Compare that with the New York Stock
Exchange, which only has an average daily trading volume of $55 billion. In fact,
if you were to put ALL of the world's equity and futures markets together, their
combined trading volume would only equal a QUARTER of the Forex market. Why is
size important? Because there are so many buyers and sellers that transaction
prices are kept low. If you're wondering how trading the Forex market is different
then trading stocks, here are a few major benefits.
Many firms don't charge commissions – you pay only the bid/ask spreads.
There's 24 hour trading – you dictate when to trade and how to trade.
You can trade on leverage, but this can magnify potential gains and losses.
You can focus on picking from a few currencies rather than from 5000 stocks.
Forex is accessible – you don’t need a lot of money to get started.
How is Forex traded ?
The mechanics of a trade are virtually identical to those in other markets. The
only difference is that you're buying one currency and selling another at the same
time. That's why currencies are quoted in pairs, like EUR/USD or USD/JPY. The
exchange rate represents the purchase price between the two currencies.
Example:
The EUR/USD rate represents the number of USD one EUR can buy. If you think the
Euro will increase in value against the US Dollar, you buy Euros with US Dollars.
If the exchange rate rises, you sell the Euros back, and you cash in your profit.
Please keep in mind that forex trading involves a high risk of loss.
Important: be aware of the risks:
Finally, it cannot be stressed enough that trading foreign exchange on margin
carries a high level of risk, and may not be suitable for everyone. Before
deciding to trade foreign exchange you should carefully consider your investment
objectives, level of experience, and risk appetite. Remember, you could sustain a
loss of some or all of your initial investment, which means that you should not
invest money that you cannot afford to lose. If you have any doubts, we recommend
that you seek advice from an independent financial advisor.
Thanks,
Surbhi Maheshwari [MBA Fin / Mktg ]
Manager Finance
On Line Assistence :
Gtalk : SurbhiM.AeroSoft@gmail.com
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