A Little Basic Forex Learning
Forex trading is the simultaneous buying of one currency and the selling of another currency.
This continuously changing number financial system was launched in the 1970s. It is now the largest liquid financial market today with daily trades totaling well over 1 trillion dollars. The New York Stock Exchange is not nearly as large as the Foreign Exchange or Forex.
Trading
Forex is a true 24-hour market, which offers a major advantage over equities trading. Forex transactions take place online anywhere in the world around the clock. The market activity starts in Sydney, Australia and moves around the globe as various financial markets open around the world. Trading is not limited to a centralized location like the Stock Exchange or Futures Markets.
Currency
Currency exchange trading involves buying and selling two different currencies simultaneously. Markets are primarily affected by international trade flows and the flow of investment currency. Prices are quoted in pairs with a “Bid”, and an “Ask” price completing the quote.
The “Bid” price is the price the Dealer will pay or the Trader will sell for the currency. The “Ask” price is the amount the Trader will pay or the Dealer will sell the currency. The quote on some currencies are dependent on the US Dollar such as the Euro, British Pound, and the Australian Dollar to name a few.
Market
The foreign exchange market never closes so there is not the backlog of orders or excitement over breaking news stories that affects the open of the stock exchanges. The market in the traditional sense does not exist since there is no central trading location. The main currency market is the “interbank market” where large institutions deal with the risks of the fluctuations of the values. The “spot market” is the market for the buying and selling of currencies at the prevailing price. The Forex ECN provides an area or marketplace for traders to buy and sell very similar to a giant department store.
Trade
Trades can happen very quickly in seconds or take months to complete. The trader must secure a profit from the purchase and sale of the currency. This has spawned a technology allowing the trader to automate a lot of the process. The traders that are consistently profitable are those that have done their homework and understand the risks involved. By entering a trade, you are gambling the price will change in your favor by an amount that will allow you to break even or make a profit. If you decide to close a trade because of an unfavorable position, you stand to lose the spread also.
Price.
The price of the trade can be as little as one hundred to several thousand dollars and can move in a direction that will either favor or hurt your position. Price graphs are used to monitor this movement. A “pip” is the smallest amount the price can change and us used to reference the movement of the value of the currency.
Remember, only a small percentage of forex traders profit consistently and they’re the ones that have learned well
95 % of the investors in the forex market are losers! Do you have the drive to join the five percenters? Learn how to become a member of that 5% club.
