How To Start Trading The Forex Market? Part1

Start Trading The Forex Market Part1 - What is FOREX MARKET or FOREX? PART I, The Foreign Exchange Market (also known as the Forex or FX market) is the largest financial market in the world, with more than $1.5 trillion changing hands every day.

How To Start Trading The Forex Market? Part1

How To Start Trading The Forex Market? Part1

That's bigger than all the US equity and Treasury markets combined!

Unlike other financial markets that operate in a centralized location (i.e. stock exchanges), the worldwide Forex market does not have a central location. It is a global electronic network of banks, financial institutions and individual traders, all involved in buying and selling national currencies. 

Another key feature of the Forex market is that it operates 24 hours a day, according to the opening and closing of financial centers in countries around the world, starting daily in Sydney, then Tokyo, London and New York. Whenever, in any location, there are buyers and sellers, making the Forex market the most liquid market in the world.

Traditionally, access to the Forex market was only available to banks and other large financial institutions. With the advancement of technology over the years, however, the Forex market is now available to everyone, from banks to money managers to individual traders trading retail accounts. The time to engage in this exciting global marketplace has never been better than now. Open an account and become an active player in the largest market on the planet.

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

Whether you realize it or not, you have already played a role in the Forex market. The simple fact that you have money in your pocket makes you an investor in currencies, especially in US Dollars. By holding US Dollars, you have chosen not to hold another country's currency. Your purchase of stocks, bonds or other investments, together with the money held in your bank account, is an investment that is highly dependent on the integrity of the currency value of the US Dollar. 

Due to changes in the value of the US Dollar and the resulting exchange rate fluctuations, your investments may change in value, which affects your overall financial status. With this in mind, it is not surprising that many investors take advantage of Exchange Rate fluctuations, using the volatility of the Foreign Exchange market as a way to increase their capital.

Example: suppose you have $1000 and buy Euros when the exchange rate is 1.50 Euros to the dollar. You will then have 1500 Euros. If the value of the Euro against the US dollar increases then you will sell (exchange) your Euros for dollars and have more dollars than you started with.


You may see the following:

The last trade of EUR/USD 1.5000 means

One Euro is worth $1.50 US dollars.

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

FOREX plays an important role in the world economy and there will always be a tremendous need for currency exchange. International trade is increasing along with the increase in technology and communication. As long as there is international trade, there will be a FOREX market. The FX market must exist so that a country like Germany can sell products in the United States and be able to receive Euros in exchange for US Dollars.


Currency trading risks

Trading currencies on margin is a very risky form of investment and is only suitable for individuals and institutions capable of dealing with the potential losses it entails. Accounts with brokers allow you to trade foreign currencies on a highly leveraged basis (up to about 400 times your account equity). 

Funds in accounts traded with maximum leverage can be lost completely if positions held on the account experience even a one percent swing in value. Given the possibility of losing one's entire investment, speculation in the foreign exchange market should only be carried out with risky capital funds which, if lost, would not significantly affect the investor's financial well-being.

That's How To Start Trading The Forex Market? Part1


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