Foreign exchange, commonly termed forex or FX for short, is the biggest market in the world. During the working week it operates 24 hours per day and turnover is in the region of $3.98 trillions daily. It offers an immensely profitable money making opportunity to investors both large and small.
The trade is in currency rather than stocks, bonds, options, futures, commodities or shares. As the price of currencies move up and down constantly, buyers and sellers make or lose money depending on their skill at trading.
Forex as a Business
It is a business like no other and as a trader you can take a short term position or a longer one. The choice is entirely your own as to what you buy and when you buy or sell.
Forex trading involves the relative strength of one country’s economy against another at any given time. A common pairing for example is the US dollar against the euro. This is written as USD/EUR.
If you chose to enter this market and you believed that the US dollar was undervalued and is due to rise in price against the euro, you would execute a trade to buy US dollars and sell euros. Assuming all goes the way you forcast you will make a profit. Conversely you could lose money, at least in the short term.
There are Losses
Starting out you do not have to use any money at all. You can open a dummy trading account or demo account at one of many of the online tradng platforms, such as Metatrader 4, and make as many trades as you like for as long as you like without spending a penny.
Social Trading is a great way to learn and earn. Read more…
Once you do enter the market, to prevent losses spiralling out of control you will use money management techniques, termed stops or stop losses. Of course, if it was as easy as that everyone would be trading forex and getting rich.
However, there are so many factors controlling the markets and they can often come unexpectedly and suddenly. Therefore it is imperative that a newcomer take some forex trading classes in order to become proficient in trading.
Currency trading is done in pairs. Buying one currency and selling another. You can trade in as many pairs as you like although it would be adviseable to start with one or two in order to keep on top of your investments until you become more experienced. Indeed some very successful traders do just that and only that.
The Major Currencies
Most home investors concentrate their trading on the major
seven currencies which are listed below.
USD – US Dollar
EUR – the Euro
GBP – British Pound
JPY – Japanese Yen
CHF – Swiss Franc
AUD – Australian Dollar
CAD – Canadian Dollar
You will see them written in their various pairings as follows:
USD/EUR, GBP/USD, CAD/CHF, AUD/USD, JPY/EUR and so on…