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What Is Forex? A Quick Guide Into the World of Currencies
So let's get started! What is Forex?
Forex is an acronym for Foreign currency. The foreign exchange is really a currency market where currencies are traded. It represents the biggest financial market in the world with daily trading volume exceeding $4 trillion. Simply to compare, other financial markets such as equities at $50 billion daily trading volume, and the futures market at $30 billion in daily volume you can begin to understand the size of the animal and most importantly the infinite trading opportunities that lie before you decide to!
The Forex market is really a 24 hour market running from Monday morning in Tokyo to Friday evening in New York - non-stop action across the globe! This differs vastly in the other financial markets (like stock markets and commodities exchanges) which open at the beginning of and close at the end of their trading day. They are directly tied to time zone that they're in which means they are more difficult to trade. So for instance, for someone residing in Australia, if they wanted to trade the united states stock market they would have to be up through the night to do so because of the time difference. You will have no such problems in Forex! You are able to trade anytime, anytime you like. Obviously, the very best times to trade are when the biggest financial markets are open - that's the US and European markets - as the biggest players are to play and liquidity is at its highest.
Players that come into the forex market vary significantly, its possibly the only marketplace and you'll discover traders with $500 accounts trading against big players (and winning!) for example hedge funds, large banks, corporations and governments!
OK so I get what Forex is, but explain Forex Trading!
Essentially, Forex currency trading means exchanging once currency with another, for a time period, for a profit. Within this business (yes it is a business) you're basically speculating that, for several reasons, you anticipate that a currency will go up or down in relation to another currency and you're prepared to bet a certain amount of your capital to profit from that idea. For example, you could expect the Euro to increase from the US Dollar, so you buy Euro's then sell $ $ $ $. When the Euro actually rises, you can sell the Euro's, buy US Dollars and take your profit.
Fundamental economic news and political situations play an important role within the fluctuation in worth of a currency for just about any given country. I will be starting much more detail relating to this in the Fundamental vs Technical trading article which you'll be posting in this series!
