What is Forex?
The Forex (FX) market is the largest and most liquid financial market in the world. It is the arena in which a nation’s currency is exchanged for that of another at a mutually agreed rate. It was created in the 1970′s when international trade transitioned from fixed to floating exchange rates. Traditionally, the Forex (FX) market has been the preserve of banks and larger financial institutions. However with advances in technology, and the global nature of the market, it is now possible for traders of all levels of experience to take part in online currency trading via a forex company.
Forex currency trading, also known as “foreign currency trading”, offers currency traders huge opportunities to benefit from fluctuations in the currency markets; This can be achieved by opening a Forex trading account with a FX Broker (“Currency broker”) that offers online forex currency trading. However currency trading also involves significant risk of loss.
With an estimated USD 4 trillion traded each day, the Forex market is larger than the stock and futures markets combined. Unlike other world markets, the Forex market is a continuous market providing Forex traders with 24-hour market access. Although it’s open all the time due to the four different world trading sessions, you should only monitor the market closely during the busiest sessions which are the New York and London sessions. The weekends are market holidays and there is no trading activity going on.
The size of the Forex market may sound huge, but the way the FX market functions, unlike other financial markets, is quite simple. Therefore it’s easy to learn the basics of foreign exchange (“Forex”) markets trading. Currencies are bought and sold for each other at a certain rate. If you open a trade by buying a currency when it’s low and selling it when it’s high, you make a profit on your Forex investment capital, i.e. you make money. The only tricky part is to know what moves the foreign exchange market, how the different factors affect it, and in which direction it will move next. These factors include economic or political events. These need to be factored in when a foreign currency trader decides the direction in which currencies will move.
There are many Metatrader 4 brokers worldwide offering forex services and forex signal services. But before you try your hand at forex investing, make sure you carry out your due diligence and choose a regulated reputable broker.
Large corporations trade on the FX market to control revenues and expenses incurred in various currencies through hedging whereby a trade or multiple trades are opened in order to try and minimize on the losses in other trades
Investors trade currencies for profit. Most forex trading is speculative by analyzing market and political news (fundamental analysis) and/or studying the chart history of an instrument (technical analysis). Unlike other asset markets, in forex it is possible to profit from a currency losing value as it is from the currency rising in value
ADVANTAGES OF THE FOREX MARKET
- Forex investing offers some of the best reward/risk opportunities of any financial market
- Forex market hours are the most flexible of any financial market
- Massive trading volume, resulting in a high level of liquidity (the ability of a market to accept large transactions)
- No-one can corner the market
- Forex trading has among the lowest start-up costs in terms of money and time, of any financial market
- Traders can profit from the smallest movements in the exchange rate through the use of leverage
- Traders can earn steady income on open positions through rollovers/swaps
- Free “Demo” Accounts, News, Charts, and Analysis
- “Mini” and “Micro” lot trading through the Meta-Trader 4 trading platform
RISKS OF TRADING FX
The increased amount of leverage means that traders can lose all, or a large portion, of their trading capital if the market makes a significant move against the trader’s current open position/s. Therefore, margin FX is a high risk product and may not be suitable for all investors. On the other hand, high leverage is a great opportunity for traders with relatively small capital to achieve nice profit.