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What's Forex? A Quick Guide Into the Realm of Currencies



So let's get started! What is Forex?

Forex is short for for FOReign EXchange. The foreign currency is really a currencies market where currencies are traded. It represents the biggest financial market in the world with daily trading volume exceeding $4 trillion. Just to compare, other financial markets for example equities at $50 billion daily trading volume, and the futures market at $30 billion in daily volume you can start to understand how big your pet and more importantly the infinite trading opportunities that lie before you!

The foreign exchange market is a 24 hour market running from Monday morning in Tokyo to Friday evening in Ny - non-stop action across the globe! This differs vastly from the other financial markets (like stock markets and commodities exchanges) which open at the beginning of and close after their trading day. They are directly associated with the time zone that they're by which makes them much harder to trade. So for instance, for somebody residing in Australia, if they desired to trade the united states stock exchange they would need to be up through the night to do so due to the time difference. You will have no such problems in Forex! You are able to trade at any time, at your convenience. Obviously, the best times to trade are when the biggest financial markets are open - that is the US and European markets - because the biggest players are out to play and liquidity reaches its highest.

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The players that come into the forex market vary significantly, its possibly the only marketplace where you can find 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 currency trading!

Essentially, Forex currency trading means exchanging once currency with another, for a period of time, for any profit. Within this business (yes it's a business) you're basically speculating that, for a number of reasons, you anticipate that the currency goes down or up with regards to another currency and you're willing to bet a certain amount of your capital to profit from that idea. For instance, you may expect the Euro to increase against the US Dollar, which means you buy Euro's and sell $ $ $ $. Once the Euro actually rises, marketing the Euro's, buy $ $ $ $ and take your profit.

Fundamental economic news and political situations play an important role in the fluctuation in worth of a currency for just about any given country. I will be going into much more detail relating to this in the Fundamental vs Technical trading article which you will be posting in this series!