FOREX TRADING

As a new online forex trader you firstly have to understand that trading currencies does not come in short cuts, learning the fundamentals of trading is a process that requires both time and dedication by both practicing through a forex demo account and by widening your knowledge through basic study of the markets and the terminology used during trading. It is important to fisrt of all understand that forex is the acquisition or purchase of one currency from a trader or a financial institution in with the goal to exchange the currency for another at an equivalent rate. As the currency market fluctuates based on a number of related and unrelated factors currencies will go up and down therefore bringing opportunities for profits during exchange. The forex market is a speculative market; meaning that predictions (speculations) are calculated on clear speculations that traders will come to based on breaking news, political pressures or other information released internally or through the media which might cause currencies to fluctuate upscale or downscale. The clear speculative form of the online currency market enhances it to rank as the most liquid online trading market with more than $1,9 million traded daily. Savvy investors are getting out of the stock market and into forex trading and this industry has seen may other professionals and normal people join in the fun and games. It is a very new industry, only emerging in 1978. This was seven years after the Gold Standard was discarded, and when currency was first allowed to float in relationship to supply and demand. By the same token, till 1995, as usual the only traders who could benefit from this market was banks, and large multi-nationals, but all that has now changed. It is all thanks to the internet and computer technology that market which were once closed to the man in the street have opened up. Internet entrepreneurs are becoming rich and benefiting from many highly profitable markets today and the growth in popularity of forex trading has been fast, exponential as well as explosive. This is not surprising that it has fast become the worlds most profitable trading market.

Forex is unlike the traditional form of trading in which there is a central trading floor and buyers and sellers are brought together. Forex floats on the air waves of the internet, it is virtual money, and trading takes place through foreign exchange clearing houses or brokerage firms. All around the word trader are conducting business over high speed broadband and they have all the information they need at their fingertips. This market is the most profitable, because it is the largest marketplace in the world and it accounts for trading in excess of $1.9 trillion daily. These figures have been confirmed by 1998 figures from the fourth Central Bank Survey of Foreign Exchange and Derivatives Market Activity. Obviously it is believed that these amounts are significantly higher now twelve years down the line. To give this amount some perspective, activity in the Forex market is 75 times more than the New York Stock Exchange on any given day. The trading which takes place on this trading market, also using figures from 1998 are $16 billion, and the London Stock Exchange is $11 billion. From this we see that activity in Forex is vastly superior to that taking place in stock market trading. As well as being the most profitable market in the world foreign exchange is also the most persistent and powerful, even when under threat of negative economic indicators. Forex is of a macro-economic nature and currency “trends” far better than any and every other market commodity. Most commodities are fundamentally of the supply and demand nature and can change dramatically over night. This was seen with the September 11 disaster and the dot com market adjustment. Currency is predictable and stable and the fundamentals are less random, much like interest rates which only adjust in small increments, and gradually over time. This fundamental predictability is illustrated quite simply by looking at the US$. Of the 1.2 trillion dollars of Forex traded daily 83% is spot foreign exchange and 95% is swap activity and all of this involved the US$. The second most active is the Euro at 37% and at 24% the Japanese yen in thirds. Pounds Sterling is fourth at 10% and at 7% the Swiss Franc is in fifth place; CAD (Canadian $) and AUD (Australian $) rank 6th place jointly at 3%.

In forex trading self traders concentrate mostly on spot Forex the definition of this is a trading transaction which takes place and is liquidated, and settled within 2 working days. So the reason for this type of trading is because it is highly profitable, fast and easy. In the majority it allows for good profits because of constant market fluctuations and only entails buying weaker and selling stronger. Leverage is applied with regard to Forex trading and it allows the trader to amplify profit by holding a position with $100 000 with a margin deposit of only $1 000. This is known as managing risk, and the end result is a very profitable trade which is potentially very liquid. Traders should understand that when trading forex trades will be based on the limitations or the frames set by his broker; as his forex broker which in the vast majority of cases is the online forex operator or forex site as abbreviated commonly by users. The forex market is a 24 hour market and starts operations at 6:00 PM EST on Sundays in Sydney all the way to Friday at 4:00 PM EST when it will close its doors to traders for the weekend in New York.