A Short Introduction To FOREX

FOREX is the world's largest and most liquid trading market. Many consider FOREX as the best home business you can ever venture in. Even though regular people have had the opportunity to take part in trading foreign currencies for profit (in the same way banks and large corporations do) since 1998, it is just now becoming the cool, hip, new "thing" to talk about at parties, business events, and other social gatherings.

Even though it has been somewhat of a loosely guarded secret, every day more and more investors are turning to the all-electronic world of FOREX trading for income and profit because of its numerous benefits & advantages over traditional trading vehicles, like stocks, bonds and commodities.

But, still, whenever something seems new or is just becoming a part of social conversation, news articles, and water cooler gossip, misconceptions have to be overcome, the mindhas to be open and the slate has to be clear for starting out fresh with the CORRECT information.

So, in this article, it is my attempt to give you some solid, but not over-detailed, information on just what the heck "FX" (FOREX) means, what it is, and why it exists.

As a successful trader said, Trading FOREX is like picking money up off the floor. Not trading FOREX is like leaving it there for someone else to pick up." Others in the industryhave also said, Trading FOREX is like having an ATM machine on your own computer.

Here's an explanation (one I feel you'll appreciate) of what FOREX is and how a bunch of traders, profit from it:

The Foreign Exchange Market, also referred to the "FOREX" or "FX" market, is the spot (cash) market for currency.

But, don't mistake FX as trading the futures market, where you buy a contract to purchase a particular currency at a future price in time.

What FX traders do is much less risky than trading currencies on the futures market, much more profitable, and a lot easier, than trading stocks.

So, you're probably wondering where it's at ... or ... how to access the FX market?

The answer is: FX Trading is not bound to any one trading floor and is not centralized on an exchange, as with the stock and futures markets. The FX market is considered an Over-the-Counter (OTC) or 'Interbank' market, due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period.

Yes, if that's the first time you've heard about an all-electronic market, I know this may sound somewhat intriguing to you.

Here's what you are actually trading when you participate in the Foreign Exchange (FOREX) market:

Essentially, like the large banks who use the FX market to protect themselves from the fluctuating exchange rate of different currencies, as an investor, what a FX trader is doing issimultaneously exchanging one countries currency for another. So, in actuality, they're electronically trading a currency-pair and the price that is quoted to us is the exchange ratebetween the two currencies.

In other words, simply the quoted price is how many of the one currency is worth 1 of the other currency.

Example:

EUR/USD last trade 1.2850 - One Euro is worth $1.2850 US dollars.The first currency (in this example, the EURO) is referred to as the base currency and the second (/USD) as the counter or quote currency.

The FOREX has a DAILY trading volume of around $1.5 trillion dollars - 30 times larger than the combined volume of all U.S. equity markets. This means that 1,498,574 skilled traders could each take 1 million dollars out of the FOREX market every day and the FOREX would still have more money left than the New York Stock exchange every day!

The FOREX plays a vital role in the world economy and there will always be a tremendous need for the FOREX. International trade increases as technology and communication increases. As long as there is international trade, there will be a FOREX market. The FX market has to exist so a country like Japan can sell products in the United States and be able to receive Japanese Yen in exchange for US Dollar.

There's plenty of money to be made using FOREX for plenty of traders that use the right trading techniques / tactics that will allow them to profit immensely. And, with only 5% of the daily turnover of volume coming from banks, government and large corporations who need to hedge, the other 95% is for speculation and profit.

http://www.1-forex.com

Omar Vargas; Forex trader and freelance writer. http://www.1-forex.com/

More Resources

Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exiting

More Currency Trading Information:

Related Articles

What I Learnt Losing £60,000 My First Year as a Full-time Trader
During my first year as a local (independent trader) on the floor of LIFFE, I bought and sold 8804 FTSE futures contracts, about 40 contracts per day on average. The result was a loss of £61,620 or -£267 per trading day.
How Currencies are Traded in the FOREX Market
Currencies are traded in dollar amounts called "lots". At 100:1 leverage, one lot is equal to $1000 which controls $100,000 of a given currency.
Reality of Online Forex Trading
Foreign exchange trading is the trading of currencies. Most currencies can be traded.
Risk and Stock Trading Fees: The Two Barriers To Overcome If You Want A Successful Trading Career.
You know the old joke:"How do you make a million in the stock market? Start with two million?"There is no way around it, risk and stock market fees are a part of trading that you can`t avoid. But, you can manage your risk.
Hedging Foreign Exchange Risks
The exchange rate of the Macedonian Denar against the major hard currencies of the world has remained stable in the last few years. Because of the IMF restrictions, the local Narodna (Central) Bank does not print money and there are no physical Denars in the economy and in the local banks.
Psychology Of Trading
The psychological aspect of trading is usually underestimated by those new to trading. The psychological problem for most traders is the fear of losing - ironically it is this fear that causes most traders to lose money in the long run.
Adaptation to the Realities of the Market
Do you think adaptation to the realities of the market is the most important thing?Many times in the past I've written about the need to adapt, the need to be able to change your behavior relative to the market because the markets are ever changing. I've stated that mechanical systems may be workable, but for only a short time relative to the life of markets.
A Fools Game
I received an email this week with a question (below) which caused me to think about the wisdom of pursuing trading as a career. Regardless of your trading time span, the skills and concerns of active short-term trading are relevant to all market particpipants.
6 Critical Factors For Successful Trading
Success in any profession can be broken down into a number of critical factors. Trading is no different.
Forex Trading
Foreign exchange market, or better known as FOREX, is the world's largest and most prolific financial exchange market originated on 1973. Bearing the status of largest and most prolific currency exchange market, FOREX is the center stage where a vast majority of the currency trading or FOREX trading takes place, with a total daily turnover of currency worth more than $1.
Internet and Computer Systems in the FOREX Business
With every passing year the interest in electronic trading is bigger, more especially trading shares and currency through Internet. A new profession came forward - this of the currency dealer.
Forex2u Forex Strategy On Successful Forex Trading
The essence of the FX2u Forex strategy is that it does not have any Forex trading system but could forecast the market trend accurately.Every set of Forex trading system available has its disadvantages.
Chinas New Currency Regime
The base unit for the renminbi is the yuan, which is how the Chinese currency is most commonly referred to. The official ISO abbreviation for the yuan is CNY, but it is also commonly abbreviated in the forex industry as RMB.
Types of Foreign Currency Hedging Vehicles
The following are some of the most common types of foreign currency hedging vehicles used in today's markets as a foreign currency hedge. While retail forex traders typically use foreign currency options as a hedging vehicle.
Forex Trading Online - 7 Reasons Why You Should!
Forex trading online is a fast way to use your investmentcapital to it's fullest. The Forex markets offer distinctadvantages to the small and large traders alike, makingForex currency trading in many ways preferable to othermarkets such as stocks, options or traditional futures.
Online Futures Trading - Advantages and Disadvantages
What Is Online Futures Trading?A futures contract is an agreement to buy or sell a commodity at a date in the future. Everything about a futures contract is standardized except its price.
Forex Training: Follow Your Gut or Your Broker
Which way will the forex market move? Do you just follow your gut feeling? Or do you have Neo's sixth sense that would let you be one with the market and feel the underlying currents.Trading forex is a non stop action movie but a good one, where you really don't know who will win at the end.
Trading Tips No 1: Learn How to Trade The Moment of Truth
So you have learned how to trade the markets by mastering a few trading tools like Moving Averages, Channels, Stochastics, MACD, or RSI - that is a great accomplishment achieved by only a few. However, having the tools and rules to trade markets successfully, year in and year out, is only half of the challenge.
How To Choose Wisely A FOREX Broker
Most traders use a FOREX broker to handle their transactions. What exactly are brokers? Strictly speaking, brokers are individuals or companies that buy and sell orders according the investor's decisions.
Ways to Acquire Discipline in Trading
One way to acquire discipline in trading..