What is Forex?
Forex, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world’s currencies trade. The forex market is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion. All the world’s combined stock markets don’t even come close to this. But what does that mean to you? Take a closer look at forex trading and you may find some exciting trading opportunities unavailable with other investments. involves buying and selling world currencies, taking profit from the exchange rates difference. FX trading can yield high profits but is also a very risky endeavor. Everyone can participate in foreign exchange trading via the Forex brokers
FOREX TRANSACTION: IT’S ALL IN THE EXCHANGE
If you’ve ever traveled overseas, you’ve made a forex transaction. Take a trip to France and you convert your pounds into euros. When you do this, the forex exchange rate between the two currencies—based on supply and demand—determines how many euros you get for your pounds. And the exchange rate fluctuates continuously.
A single pound on Monday could get you 1.19 euros. On Tuesday, 1.20 euros. This tiny change may not seem like a big deal. But think of it on a bigger scale. A large international company may need to pay overseas employees. Imagine what that could do to the bottom line if, like in the example above, simply exchanging one currency for another costs you more depending on when you do it? These few pennies add up quickly. In both cases, you—as a traveler or a business owner—may want to hold your money until the forex exchange rate is more favorable.
OPPORTUNITIES IN FOREX: WHAT’S YOUR OPINION?
Just like stocks, you can trade currency based on what you think its value is (or where it’s headed). But the big difference with forex is that you can trade up or down just as easily. If you think a currency will increase in value, you can buy it. If you think it will decrease, you can sell it. With a market this large, finding a buyer when you’re selling and a seller when you’re buying is much easier than in in other markets. Maybe you hear on the news that China is devaluing its currency to draw more foreign business into its country. If you think that trend will continue, you could make a forex trade by selling the Chinese currency against another currency, say, the US dollar. The more the Chinese currency devalues against the US dollar, the higher your profits. If the Chinese currency increases in value while you have your sell position open, then your losses increase and you want to get out of the trade.
All Forex trading activity is quoted in pairs. This means you are buying one currency, and selling another currency in the same pair. Currency traders make their money when there are changes in the currency exchange rates. If you believe the USD will strengthen, you would sell the cable (go short) by buying USD and selling GBP. Currency trading is all about speculation. You forecast your expectations of a currency pair and act on it by going long or going short. When a currency appreciates relative to another one, it is strengthening in value and when it depreciates relative to another one, it is weakening.
In today’s fast paced world, Forex trading can offer big profits in a very short time and it has been attracting lots of investors who have tired of other trading instruments and have lost interest in different financial markets. But let’s face it, with hundreds of brokers pedaling their wares, deciding on the right broker can be challenging and time consuming.
To ease the process of selecting a Forex broker, the team at Dailyforex.com has tested and reviewed dozens of the top rated Forex brokers and we have compiled our findings into thorough and honest
Forex broker appraisals. We say it like it is and post the truth and nothing but the truth. So before making your selection and registering for an account, spend some time reading our Forex broker reviews so you have the best chance of becoming a profitable Forex trader.
Forex is easy to learn and success can come with the very first trade. Understanding how the final analysis of profit and loss is configured is an important first step in Forex trading and a certain amount of Forex training is definitely a prudent undertaking by all traders if any money is to be made in currency trading. Understanding the technical and fundamental reasons behind currency pairs and how they affect price movements as well as knowledge of and familiarity with Forex indicators and tools, leads to a more successful trading experience.