How To Start Trading The Forex Market? - Part 1

What is Forex or Foreign Exchange? PART I

The foreign exchange market (also known as Forex or FX market) is the largest financial market in the world, with more than $ 1.5 trillion changing hands every day.

That is larger than all U.S. equity and Treasury markets combined!

Unlike other financial markets that operate in a centralized location (ie stock exchange), the worldwide Forex market has no central location. It is a global electronic network of banks, financial institutions and individual traders, all involved in the buying and selling of national currencies. Another important feature is that the Forex market operates 24 hours a day, for opening and closing of financial centers in countries around the world, starting each day in Sydney, then Tokyo, London and New York . At any time, any place, there are buyers and sellers, making the Forex market is the most liquid market in the world.

Traditionally, access to foreign exchange market has been available only to banks and other large financial institutions. With technological advances in recent years, however, the Forex market is now available for everyone from banks to money managers to individual traders trading retail accounts. The time to get involved in this exciting global market has never been better than now.

The Forex market is very different currency trading in the futures market, much easier, than trading stocks or commodities.

Whether you are aware of it or not, which play a role in the Forex market. The simple fact that you have money in your pocket makes you an investor in currency, particularly in the U.S. $ · With the possession of U.S. dollars, which have not elected to hold the currencies of other nations. Your purchases of stocks, bonds or other investments, along with money deposited into your bank account, represent investments that rely heavily on the integrity of its currency value of U.S. $. Due to the change in the value of U.S. dollar and fluctuations in exchange rates resulting from investments can change in value, affecting your overall financial status. With this in mind, there should be no surprise that many investors have taken advantage of fluctuating exchange rates, using the foreign exchange market volatility as a way to raise capital.

Example: Suppose you had $ 1000 and bought Euros when the exchange rate was 1.50 euros per dollar. You would then have 1500 euros. If the value of the Euro against the U.S. dollar increased then sell (exchange) your Euros for dollars and then have more money than when you started.

Example:

You may see the following:

EUR / USD the last change means is 1.5000, ie, one Euro is worth U.S. $ 1.50.

The first currency (in this example, the euro) is known as the base currency and the second (/ USD) as the counter or quote currency.

The FOREX plays a vital role in the global economy and that there will be a tremendous need for currency exchange. International trade increases as technology and communication increases. While there is international trade, there will be a foreign exchange market. The forex market has to exist for a country like Germany can sell products in the U.S. and be able to receive Euros in exchange for U.S. dollars.

RISK WARNING:

Foreign Exchange Risks

Currency trading on margin is a very risky investment, and is suitable for individuals and institutions capable of handling the losses involved. An account with a forex broker allows you to operate with a high degree of leverage (up to 400 times the account equity).

The funds from an account that is being negotiated with maximum leverage may be completely lost. Given the possibility of losing their entire investment, speculation in the foreign exchange market should only be undertaken with risk capital funds that if lost, will not significantly affect the financial welfare of investors.



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