leverage rates, liquidity of traders capital, truly 24 hours trading
environment, convenience of trading online, and the list goes on and
on. FOREX trading is one of the latest hypes in the trading world.
With more than trillions of average daily turnover, FOREX market
stands as the largest trading market. Seven of the world currencies,
United States dollars, Australian Dollars, Japanese Yens, British
Pounds, Swiss Francs, Canadian Dollars, and the Euro Dollars, are
massively traded everyday worldwide. It is simply a world market as
there are no centralize trade location available for FOREX traders.
Everyday FOREX trade begins in Sydney, and moves around the globe to
Tokyo, London, and then New York. Unlike any other financial market,
investors can respond to money-value fluctuations caused by economic,
social and political events at the time they occur - day or night.
There are a few reasons why you should learn about FOREX trading,
these includes the great leverage rates available in FOREX market,
commissions free trading, instant and convenient online trade, and
most of all, you can make money regardless to the bull/bear market
condition.
For the new comers, FOREX means foreign exchange, or more details,
foreign currency exchange. It involves buying and selling currencies
concurrently. Every time a FOREX trader makes a deal, he or she spend
different country currency to buy in the other country currency. The
trade might looks funny to you at first as FOREX traders are both
buying and selling money in the same time.
For the beginners, reading FOREX quotes might be confusing. Some
common quotes that you might be seeing are like: USD/JPY 110.2, EUR/
USD 1.2385/1.2390, and GBP/USD 1.7360/65. Now these figures might
looks complicated but the concept is relatively simple. Currency
quoted in pairs simply means the relative value compare to the other.
In our given example, USD/JPY 110.2 means a dollar of United States
Dollar is equal to 109.2 Japanese Yen. USD in our case is known as the
base currency; while Japanese Yen here is the counter currency.
Banks and currency dealers are the major traders in the FOREX market.
Large international banks such as HSBC, Barclays, J. P. Morgan Chase,
and Deutsche Bank are those who are actively trade in currency
exchange. According to Bank for International Settlements (BIS) market
surveys, more than half of the foreign exchange transactions are done
between financial organizations'either they are strictly between
banks, or it involves banks and other non-banking financial
institutions.
FOREX trading involves a lot of risks. Thus, analytical approach is
always necessary to manage and minimize such risks. Similar to any
other investments, FOREX traders apply two kinds of approaches to
manage their risk: the fundamental, and the technical analysis.
Fundamental analysis basically means studies of surrounding events
that affect the market trends. For example FOREX market, fundamental
traders will consider events and situations that will affect the value
of a country currency value. These factors include the local bank
policies, political states, country growth rates, natural disasters,
market speculator's mood, terrorism attacks, and wars.
Instead of reviewing on the fundamental issues, traders from technical
side define market movement according to data purely generated from
the market. The term 'Technical' is applied in all trading fields,
from commodity stocks exchange to option trading, from FOREX to
futures.
A pure technician does not care much about fundamental issues, as they
always believe the number has it all. The future does not equal with
the past. There are a lot of unexpected variables that technical
analysis does not reflect on: change of country leaders, change of
government, natural disasters, change of bank policies, investor's
mood, war-- all these factors affect currency value directly and might
not have happened before in the past. A combined of two approaches
(fundamental and technical) is always encourage to get the optimum
plots on your investment plan.
Although there are a lot of risks involved when trading currency,
FOREX trading, however has a lot of key advantages. It is a truly
worldwide market; trades can be done all time. In FOREX trading, you
do not need to wait the market to open, you can always response to
world latest movement and news immediately. With the ease of Internet
access, transaction in FOREX can be done in anytime regardless on your
location. This gives you the convenience to work on any time, any
where - which in turns gives you the freedom you cannot have in other
trade markets.
Also, FOREX trading offers incredibly high leverage rates to the
traders. It gives the opportunity to trade in large margins with
minimum capital put down on the table. Normal FOREX account offers
leverage rates from 50 to 1 or 100 to 1 till 200 to 1. This means that
with $2,000 capital on a 100 to 1 FOREX account, you can now control
currency with value up to $200,000. This in turns magnify the ROI of
the FOREX traders with less cash outlay.
You come to this article probably because of you are new to FOREX and
were looking for some readings on the Internet. To be frank, FOREX can
be very profitable but the risk lie beneath is equally great. Remember
to always trade with proper investment plan and strategy. Read books,
attend courses, watch video seminars, read papers, or even practice
first with a dealer's demo account to get yourself ready. Trade
smartly, and gain the maximum out of FOREX - good luck!
Achieving Financial Independence with Forex: http://www.pipomavens.tk/
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