Fx Market

The FX Market: The Facts

The forex or FX market is the currency trading market where foreign currencies are exchanged. It is not located in just one place. By its very nature it is a global market and trading happens all over the world.

In a sense there is a separate market for each currency pair. Every possible combination of currencies has its own price. Although these are related in some ways there is not necessarily a direct connection between them. Obviously if a country is doing very badly in economic terms, then its currency is likely to fall in comparison with most other countries. But another country might be doing even worse and then the opposite would show on that particular currency pair market. For example the dollar could be falling against the euro while at the same time it is rising against the yen.

The biggest participants in the FX market are banks and other large financial institutions who have a lot of money to invest. They employ professional currency traders who do this for their job. But the markets are so huge and access is so easy that anybody can get involved these days.

All you need is a computer with a high speed internet connection. Do not try trading over a dial up connection! You will find it very frustrating. Prices will change too fast for you to act and you will probably lose money.

You will also need access to a broker who will cover your trades by offering you leverage. This means that with say $100 of your funds you can control $10,000. The broker handles this amount, but you can get started with just a few hundred dollars in a mini FX trading account.

The forex market is highly liquid and very volatile. Liquidity is a measure of how easy it is to turn an investment to cash. Currency is already cash so it has high liquidity. What this means for you is that you can buy and sell at any time. You do not have to wait to find a buyer as you often do with stocks.

The high volatility of the forex market means that prices are constantly changing. This makes it a very risky investment but also potentially very profitable. The possibility of gaining or losing a lot of money in a short time is very attractive for people who are prepared to take the risks. Forex trading is exciting and can be very lucrative for the skilful trader.

Traders use charts and graphs to indicate trends in the movement of the prices. The aim of course is to predict whether the price will continue to move in its current direction or when there will be a reversal. These charts and graphs are normally provided by your broker.

At the same time it is important to stay alert to world events that might affect the financial markets. Many brokers also provide a live feed of forex news. This can be very useful if only to remind you to leave the FX market by closing your trades before major financial announcements are expected.

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Sunday, June 28th, 2009 Introduction No Comments

What Is Forex Currency Trading In The Fx Market

What is currency trading? It is something that sounds quite simple and many people speak about it as if the meaning is obvious, but not everybody knows what it really is and how it works.

Currency trading is also known as forex trading. Forex (sometimes written FX) is short for foreign exchange.

You probably know that the value of each country’s currency goes up and down according to how well the country is doing compared with others. So for example, the value of the Canadian dollar against the US dollar will be higher or lower depending on reports of the Canadian and US economies. The same thing happens with all other currencies.

Currency values are constantly changing, so a trader can easily deal in them to make a profit. He or she can buy when a currency is worth less and sell when it is worth more, just as a stock trader would do.

The difference is that where stocks have only one value, their value on the stock exchange, a currency has different values compared with each of the other currencies. So for example the Canadian dollar might rise in relation to the US dollar but at the same time it could fall in relation to the Japanese Yen, if the Yen rose even higher.

Principles Of Currency Trading

Most forex market trading is margin trading. This means that instead of buying the whole value of the currency, you can invest in only a percentage. This allows a small deposit to control larger amounts. The principle of it is that a currency is very unlikely to change in value by more than a certain percentage of its value.

To simplify trading, currencies are traded in what is called pips, or price interest point system. These are the units of trading. They give a standard for comparison as the currency values change relative to each other. So you will hear traders talk of a currency gaining or falling by a certain number of pips, rather than talking in dollar terms.

How To Make A Profit With Currency Trading

In order to make a profit with currency trading, you need to have some idea of the likely movements of currencies. This knowledge can be gained by analyzing the markets or by applying a system that experienced traders have figured out from their own analysis.

If you are a beginner it is probably better to be receiving your information and analysis from somebody with more experience at first. You can pick up a lot of different systems online and watch how each one does, or you can work with an automated system. These are known as expert advisers or forex robots, and they will make the trades for you when the time is right according to the settings that you have programmed.

If you use an automated forex system you do not need to know what is currency trading in so much detail, although as with all things, the more you know the more success you are likely to have.

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Sunday, May 17th, 2009 Introduction No Comments