What is Forex Trading: Foreign Exchange Market? - What is Forex? - Where to Trade Forex? - How to Start Forex Trading
Many Forex traders are starting to ask around about what is Forex trading? - What is Forex Currency Trading? - What is FX Trading? - Where to Trade Forex? - How to Trade Forex? and How to Start Forex Trading? - the most common questions that most new currency traders ask are:
- What is Forex Trading? - Where to Trade Forex?
- What is a Platform Software?
- How to Start Forex Trading?
- What is a Forex Trade System?
Most of these questions are discussed in other topics, but the basic question is What is Forex??
The foreign exchange is an international online market where 5.2 trillion dollars is traded everyday.
The Foreign exchange market was established in 1971, when the floating exchange rates system was introduced. The Foreign exchange is not centralized, unlike the stocks.
Currency trading is done through interbank connections through banks which are known as forex liquidity providers and forex brokers that connect individual forex traders to this interbank network. Trading therefore occurs over computer and telephone networks at thousands of locations worldwide.
This makes the Foreign exchange is a decentralized market formed by a large network of banks collectively known as the interbank market. These banks determine the exchange rates, based on the supply and demand for theFX currencies.
The foreign exchange is commonly referred to as FOREX, FX or Spot FX and this is where banks, companies, investors and speculators exchange one currency for another either for the purpose of facilitating international trade or profiting from the exchange rate difference.
The forex currencies traded are named using 3 alphabetic symbols, the first 2 represent the name of the country while the third symbol represents the first letter/initial of the currency.
The Foreign Exchange is the largest financial market in the world and 5.2 trillion dollars is traded every day, compared to US stocks that trades 0.5 trillion dollars. FX is opened 24 hours a day because it is an interbank market whereby if banking centers in the USA are closed those in Europe are open, and when these are not opened those in Asia are opened. The typical forex trading day starts in Sydney, then Tokyo , then London and finishes with the New York session.
In the Forex market 90% of all trades is done for the purpose of speculation for profit, the rest is traded for the purpose of settling international trades between countries. This is made possible because the Foreign exchange is an over the counter interbank market, that can facilitate trading transactions between many forex traders through online forex brokers.
FX is based on the concept of floating currencies in the open exchange market, in what is called the international money market where the participants are Banks, Brokerages, Fund Managers, Governments, Central Banks and individual speculators. The value of FX currencies is determined by demand supply forces and a country monetary policy. Other factors that affect currency value is political stability of a country.
Forex Trading for speculators
Until recently, FX Trading was only available to professional forex traders from major and international commercial banks, investment banks, money managers, registered Forex dealers, international money brokers and large multinational corporations. Now that forex is available online traders want to knowWhat is FX Trading?
But with the emergence of internet and online forex brokers, speculators and retail forex traders can now participate in the FX market, through retail Forex brokers.
These days with the presence of computers and easy access to internet everywhere, online forex currency trading has become very popular. There are so many Forex brokers available on the internet.
Traditionally Forex trading was only available to only the rich who had capital of more than $1 million. however with the growth of internet forex brokers are now able to provide retail forex trading accounts that can be opened with as little as $100 and forex traders can trade Foreign exchange currencies over the internet.
The forex trader only needs to download a forex brokers online forex trading software then open an account with the forex broker and then start to trade forex currencies online through the online forex broker.
Forex Trading - How to Start Forex Trading?
Currency exchange is not centralized like the currency futures market or the stock exchange markets. Currency trades occurs over multiple computers and telephones at thousands of locations worldwide, through inter-network of banks known as interbank network.
Forex trades are placed from Online Forex Trading Platforms like the one below.
The Foreign exchange market commonly referred to as Forex is where banks, investors, speculators and other foreign exchange market participants, exchange one currency for another. The largest foreign exchange activity in the foreign exchange is between the five major currencies:
- US Dollar
- British Pound
- Japanese Yen
- Euro and
- Swiss Franc
The Forex Trading is also the largest financial market worldwide. In comparison to USA stocks which trades $700 billion per day the Foreign exchange trades up to $5.2 trillion in a single day.
The Foreign exchange is open 24 hours a day and currencies are exchanged in the Inter-bank market. The foreign exchange market follows the clock around the world, trading moves from the major banking centers in the United States of America to those in Australia & New Zealand then to those in Asia, then to Europe and the back again to those in the Unites States.
Until now, only professional forex traders from the major international commercial/investment banks used to dominate the FX trading market. Other forex market participants who have now joined in range from large multinational corporations, registered dealers, international money brokers, global money managers, futures trader, options traders, retail forex traders and private speculators.
There are 3 main reasons to participate in the Forex market
- One is to facilitate an actual transactions, where the international corporations convert and cash in profits made in foreign currencies into their local domestic currency.
- Corporate treasurers & money managers also trade FX so as to hedge against unwanted exposure to future price action movements in the currency exchange market.
- The third and most popular reason is based on speculation for profit. In fact, it is estimated that less than 5% of the total forex trade transaction activities on the Foreign exchange is what actually facilitates commercial transaction, the other 95% is speculation based transactions retail forex trading.
The FX market is considered to be an Over the Counter (OTC) or 'Inter-bank' market, based on the fact that forex trade transactions are conducted between two counter-parties over an electronic network.
Global Forex Trading Hours
Foreign exchange market is not centralized within any exchange center, as the case with stocks and futures markets. Foreign exchange is a true 24 hour market, where the Forex trading day begins in Sydney, then to Tokyo, London then New York, all around the globe. When it comes to global foreign exchange, forex traders can respond to currency exchange rate fluctuations caused by economic, social & political events at the time they occur, day or night.
How To Start Forex Trading
If you are looking for a new way of investing your money look no further than Forex trading. Many individuals have turned to forex currency trading activities to replace their stock trading transactions activities and to supplement their income. When done correctly, you can make a good return on your investment.
What is FOREX?
FOREX is short for foreign exchange market. The best way to understand what is FOREX is to think of it as buying and selling money. This is done through the international foreign exchange market.
Participants of the foreign exchange market buy a particular currency and sell it when it is favorable to do so. Your best chance as a learning Forex trader is to understand analyze the forex trends so you can pick and trade a trending forex currency, whether it is the Japanese Yen, the Euro, or another currency.
Practice Forex Trading on Forex Demo Practice Account
because there is real cash involved in Forex trading, it is logical that many people are hesitant to join in on the market. The good news is that there are a number of ways to practice without investing real money. You should read up on various trade techniques such as practice demo accounts and thoroughly do your homework. When you are ready, download a forex trading platform software and give it a try.
During the demo practice period, you can use virtual money(like monopoly game money) to trade currencies. You can use this time to better understand the Forex market and how to use the forex platform software and technical forex trading tools. There are many web resources that you can find that offer information on the foreign exchange market and how you can analyze the information and predict changes in forex currency prices. Once you have a good forex trading system and a reliable forex trading plan that you use and it is profitable then try to trade with real money.
What is the Risk?
As with any financial investment, there are risks. Even if you research vast trade techniques, study trends, and learn how to predict changes in the forex trend, things can still go wrong. The best advice here is to use your head and better judgment, and most importantly use forex money management rules. Many people will see the power of leveraged forex currency trading within a few hours and then get greedy and go in over their heads and take risks and then lose their investment because they do not have an investment strategy or a forex trading plan. As a forex trader, you will have to learn when to trade and when not to trade. Many Forex traders become too greedy and overtrade or hold onto a losing forex trade position for too long.
You can use a forex stop loss order to exercise better control of your forex trade activities and limit your losses and risks to the downside. You can set up automatic stop orders and the forex platform software that will close an open forex trade when this target is hit. This also goes both ways; you can set an upper limit to take profit and a lower limit to stop losses.
How to Start Forex
Where to Trade Forex? The most popular way to trade the online forex trading market is to do it online from your home computer or office computer which has a forex trading platform and a fast internet connection. This way you will have greater control and access to your investments via the forex platform and you can make changes or adjustments any time of the day or night. Online forex currency trade platforms have become a great way of taking part in the online forex currency trading market, so you will not find it hard to find forex trading platforms or forex brokers online.
Make sure you find out about spreads, fees and commissions that you might be responsible for paying to your online forex broker. Always test the forex software using a demo forex account to make sure that you are comfortable with it.
What is Forrex? - What is FX Trading? - Where to Trade Forex? - How to Trade Forex? - How to Start Forex Trading? - No Nonsense Forex Training Website.