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What is Forex trading

New to Forex
What is Forex trading?

The Forex (Foreign Exchange) Market is the largest market in the word. It is the market where currencies are traded. Each day, more than 4 trillion dollars are exchanged.

Why trade Forex?
24 hour Market

The Forex market is open 24 hours a day, so that you can be right there trading whenever you hear a financial scoop.

Narrow Focus

Unlike the stock market, a smaller market with tens of thousands of stocks to choose from, the Forex market revolves around more or less eight major currencies. A narrow choice means no room for confusion, so even though the market is huge, it’s quite easy to get a clear picture of what’s happening.

Liquidity

The enormous volume of daily trades makes it the most liquid market in the world, which means that under normal market conditions you can buy and sell currency as you please.

The Market cannot be cornered

The colossal size of the Forex market also makes sure that no one can corner the market. Even banks do not have enough pull to really control the market for a long period of time, which makes it a great place for the little guy to make a move.

Simplicity

Use technical analysis (indicators on charts) methods from other markets like equities.

Basic Forex terms

Listed below are some of the key terms used in Forex and CFD/Share trading

Pip

A Pip is the "Percentage In Point" (PIP), sometimes also referred to as "Point". It is equal to a the minimum price increasement of a Forex trading rate. The most common Pip is 0.0001.

Ask price

The ask price is the price you can buy a currency at. It is also the price at which the market is willing to sell the currency to you.

Bid price

The bid price is the price you can sell a currency at. The market is willing to pay you this price for this particular currency.

Spreads

Spread are the difference between bid price and ask price.

Currency rate

A currency rate against another currency rate.

What is Forex Trading

Forex is an international financial market where free trading of currencies takes place. A short form for foreign exchange, Forex trading typically deals in the sale and purchase of currencies or the exchange of two currencies in a currency pair. It is the world’s biggest financial market and mostly trades in US dollars.

In 2010, BIS triennial report stated that the average daily trading volume in the international foreign exchange market amounted to $4.0 trillion. The amount of money traded in the foreign exchange market in a week is greater than the annual GDP of the US.
History

In order to attain financial stability after World War II, international negotiators of 29 countries had a meeting in Bretton Woods where they all agreed to the creation of a fresh economic system in which there would be fixed exchange rates.

Under the agreement made in Bretton Woods, the establishment of The International Monetary Fund (IMF) took place. IMF began operations in 1949 and had the authority to freeze rates. Exchange rates that altered by more than 1% had to be approved by this institution.

By 1960s, this system of fixed exchange rates started fail as a result of several economic and political factors. Then, President Nixon ordered to stop conversion of the US dollar to gold in 1971, as a measure to prevent the downfall of the economy of the United States. This event, known as the Nixon shock, resulted in the establishment of floating rate currency markets in 1973.

The outcome of this was that by 1976, there were floating exchange rates for all key currencies. Floating rates enable free trading of currencies in the currency market. All price changes in the market occurred as a result of market forces. This was the origin of our present-day Forex market.
Participants

Forex market includes many participants who trade for different reasons. Some trade to earn profit, some trade to pay for foreign goods and services and some trade to distribute and evade risks. Some of the key players of the Forex market include:

    Government central banks
    Investment banks
    Commercial banks
    Brokers and dealers
    Insurance companies
    Pension funds
    Individuals
    International corporations

Timings of the Forex Market

The Forex market is open for five days. However, unlike stock markets, they are open 24 hours a day as banks need to trade currency round the clock.
Factors That Can Affect Exchange Rates

The Forex market is largely affected by external factors and market forces that can influence currency exchange rates. Some of the key factors are:

    National economic performance
    Interest rates
    Central bank policy
    Trade balances – exports and imports
    Market sentiment – rumors or expectations
    Political factors – like elections or policy changes
    Unforeseen events – natural disasters or terrorism

Even with all these factors, the global foreign exchange market is quite stable in comparison to the stock market. This is because the exchange rates of currencies change very slowly and by trivial amounts.

What Is Forex Trading ?

An Introduction to Forex Trading
Hey traders,

This free Forex mini-course is designed to teach you the basics of the Forex market and Forex trading in a non-boring way. I know you can find this information elsewhere on the web, but let’s face it; most of it is scattered and pretty dry to read. I will try to make this tutorial as fun as possible so that you can learn about Forex trading and have a good time doing it.

Upon completion of this course you will have a solid understanding of the Forex market and Forex trading, and you will then be ready to progress to learning real-world Forex trading strategies.

What is the Forex market?

• What is Forex? – The basics…

Basically, the Forex market is where banks, businesses, governments, investors and traders come to exchange and speculate on currencies. The Forex market is also referred to as the ‘Fx market’, ‘Currency market’, ‘Foreign exchange currency market’ or ‘Foreign currency market’, and it is the largest and most liquid market in the world with an average daily turnover of $3.98 trillion.

The Fx market is open 24 hours a day, 5 days a week with the most important world trading centers being located in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris, and Sydney.

It should be noted that there is no central marketplace for the Forex market; trading is instead said to be conducted ‘over the counter’; it’s not like stocks where there is a central marketplace with all orders processed like the NYSE. Forex is a product quoted by all the major banks, and not all banks will have the exact same price. Now, the broker platforms take all theses feeds from the different banks and the quotes we see from our broker are an approximate average of them. It’s the broker who is effectively transacting the trade and taking the other side of it…they ‘make the market’ for you. When you buy a currency pair…your broker is selling it to you, not ‘another trader’.

• A brief history of the Forex market

Ok, I admit, this part is going to be a little bit boring, but it’s important to have some basic background knowledge of the history of the Forex market so that you know a little bit about why it exists and how it got here. So here is the history of the Forex market in a nutshell:

In 1876, something called the gold exchange standard was implemented. Basically it said that all paper currency had to be backed by solid gold; the idea here was to stabilize world currencies by pegging them to the price of gold. It was a good idea in theory, but in reality it created boom-bust patterns which ultimately led to the demise of the gold standard.

The gold standard was dropped around the beginning of World War 2 as major European countries did not have enough gold to support all the currency they were printing to pay for large military projects. Although the gold standard was ultimately dropped, the precious metal never lost its spot as the ultimate form of monetary value.

The world then decided to have fixed exchange rates that resulted in the U.S. dollar being the primary reserve currency and that it would be the only currency backed by gold, this is known as the ‘Bretton Woods System’ and it happened in 1944 (I know you super excited to know that). In 1971 the U.S. declared that it would no longer exchange gold for U.S. dollars that were held in foreign reserves, this marked the end of the Bretton Woods System.

It was this break down of the Bretton Woods System that ultimately led to the mostly global acceptance of floating foreign exchange rates in 1976. This was effectively the “birth” of the current foreign currency exchange market, although it did not become widely electronically traded until about the mid 1990s.

(OK! Now let’s move on to some more entertaining topics!)…

What is Forex Trading?

Forex trading as it relates to retail traders (like you and I) is the speculation on the price of one currency against another. For example, if you think the euro is going to rise against the U.S. dollar, you can buy the EURUSD currency pair low and then (hopefully) sell it at a higher price to make a profit. Of course, if you buy the euro against the dollar (EURUSD), and the U.S. dollar strengthens, you will then be in a losing position. So, it’s important to be aware of the risk involved in trading Forex, and not only the reward.

• Why is the Forex market so popular?

Being a Forex trader offers the most amazing potential lifestyle of any profession in the world. It’s not easy to get there, but if you are determined and disciplined, you can make it happen. Here’s a quick list of skills you will need to reach your goals in the Forex market:

Ability - to take a loss without becoming emotional

Confidence - to believe in yourself and your trading strategy, and to have no fear

Dedication – to becoming the best Forex trader you can be

Discipline - to remain calm and unemotional in a realm of constant temptation (the market)

Flexibility - to trade changing market conditions successfully

Focus – to stay concentrated on your trading plan and to not stray off course

Logic – to look at the market from an objective and straight forward perspective

Organization – to forge and reinforce positive trading habits

Patience – to wait for only the highest-probability trading strategies according to your plan

Realism – to not think you are going to get rich quick and understand the reality of the market and trading

Savvy – to take advantage of your trading edge when it arises and be aware of what is happening in the market at all times

Self-control – to not over-trade and over-leverage your trading account

As traders, we can take advantage of the high leverage and volatility of the Forex market by learning and mastering and effective Forex trading strategy, building an effective trading plan around that strategy, and following it with ice-cold discipline. Money management is key here; leverage is a double-edged sword and can make you a lot of money fast or lose you a lot of money fast. The key to money management in Forex trading is to always know the exact dollar amount you have at risk before entering a trade and be TOTALLY OK with losing that amount of money, because any one trade could be a loser. More on money management later in the course.

• Who trades Forex and why?

Banks – The interbank market allows for both the majority of commercial Forex transactions and large amounts of speculative trading each day. Some large banks will trade billions of dollars, daily. Sometimes this trading is done on behalf of customers, however much is done by proprietary traders who are trading for the bank’s own account.

Companies – Companies need to use the foreign exchange market to pay for goods and services from foreign countries and also to sell goods or services in foreign countries. An important part of the daily Forex market activity comes from companies looking to exchange currency in order to transact in other countries.

Governments / Central banks – A country’s central bank can play an important role in the foreign exchange markets. They can cause an increase or decrease in the value of their nation’s currency by trying to control money supply, inflation, and (or) interest rates. They can use their substantial foreign exchange reserves to try and stabilize the market.

Hedge funds - Somewhere around 70 to 90% of all foreign exchange transactions are speculative in nature. This means, the person or institutions that bought or sold the currency has no plan of actually taking delivery of the currency; instead, the transaction was executed with sole intention of speculating on the price movement of that particular currency. Retail speculators (you and I) are small cheese compared to the big hedge funds that control and speculate with billions of dollars of equity each day in the currency markets.

Individuals – If you have ever traveled to a different country and exchanged your money into a different currency at the airport or bank, you have already participated in the foreign currency exchange market.

Investors – Investment firms who manage large portfolios for their clients use the Fx market to facilitate transactions in foreign securities. For example, an investment manager controlling an international equity portfolio needs to use the Forex market to purchase and sell several currency pairs in order to pay for foreign securities they want to purchase.

Retail Forex traders – Finally, we come to retail Forex traders (you and I). The retail Forex trading industry is growing everyday with the advent of Forex trading platforms and their ease of accessibility on the internet. Retail Forex traders access the market indirectly either through a broker or a bank. There are two main types of retail Forex brokers that provide us with the ability to speculate on the currency market: brokers and dealers. Brokers work as an agent for the trader by trying to find the best price in the market and executing on behalf of the customer. For this, they charge a commission on top of the price obtained in the market. Dealers are also called market makers because they ‘make the market’ for the trader and act as the counter-party to their transactions, they quote a price they are willing to deal at and are compensated through the spread, which is the difference between the buy and sell price (more on this later).

Advantages of Trading the Forex Market:

• Forex is the largest market in the world, with daily volumes exceeding $3 trillion per day. This means dense liquidity which makes it easy to get in and out of positions.

• Trade whenever you want: There is no opening bell in the Forex market. You can enter or exit a trade whenever you want from Sunday around 5pm EST to Friday around 4pm EST.

• Ease of access: You can fund your trading account with as little as $250 at many retail brokers and begin trading the same day in some cases. Straight through order execution allows you to trade at the click of a mouse.

• Fewer currency pairs to focus on, instead of getting lost trying to analyze thousands of stocks

• Freedom to trade anywhere in the world with the only requirements being a laptop and internet connection.

• Commission-free trading with many retail market-makers and overall lower transaction costs than stocks and commodities.

• Volatility allows traders to profit in any market condition and provides for high-probability weekly trading opportunities. Also, there is no structural market bias like the long bias of the stock market, so traders have equal opportunity to profit in rising or falling markets.

While the forex market is clearly a great market to trade, I would note to all beginners that trading carries both the potential for reward and risk. Many people come into the markets thinking only about the reward and ignoring the risks involved, this is the fastest way to lose all of your trading account money. If you want to get started trading the Fx market on the right track, it’s critical that you are aware of and accept the fact that you could lose on any given trade you take.

What is Forex Trading

What is Forex Trading?

FOREX (FX) stands for “foreign exchange” (FOReign EXchange). The essence of the Forex financial market is the trading buying and selling of currencies at market prices.

Forex is actually a group of banks participating in trades, which buys and sells over three billion dollars of currency daily. The currency trading market operates on business days.

Forex is often mistaken for an exchange, which is not true as it does not have a specific address, like the London Stock Exchange or the New York Stock Exchange. Forex Trades are conducted 24 hours a day, so you can always buy or sell currencies. Forex Trades are carried out over the telephone and through special software, the forex trading terminals. This is great advantage for those who plan to earn money on Forex – all you need is a computer accompanied with appropriate software and an Internet connection, so you can work from the convenience of your own home!

What is Forex trading

What is Forex trading?
The foreign exchange market, also known as Forex, or FX, is the world's largest financial market with over three trillion Dollars traded every day. The Forex market is based on the trade of the world's currencies.

what is forex trading

The exchange of currencies between two or more countries on a recognized market. Forex trading is a popular type of investing because it provides investors with the ability to make quick profits due to small changes in one country's currency. Due to the time differences around the world, forex trading takes place continuously because as one market closes another one opens.

what is forex trading, How to Trade Forex Online

Trading foreign exchange on the currency market, also called trading forex, can be a thrilling hobby and a great source of investment income. To put it into perspective, the securities market trades about $22.4 billion per day; the forex market trades about $5 trillion per day. You can make a lot of money without putting too much into your original investment, and predicting the direction of the market can be a real rush. You can trade forex online in multiple ways.

    Understand basic forex terminology.
        The type of currency you are spending, or getting rid of, is the base currency. The currency that you are purchasing is called quote currency. In forex trading, you sell 1 type of currency to purchase another type.
        The exchange rate tells you how much you have to spend in quote currency to purchase base currency. For example, if you want to purchase some U.S. dollars using British pounds, you may see an exchange rate that looks like this: GBP/USD=1.589. This rate means that you'll spend 1.589 dollars for 1 British pound.
        A long position means that you want to buy the base currency and sell the quote currency. In our example above, you would want to sell U.S. dollars to purchase British pounds.
        A short position means that you want to buy quote currency and sell base currency. In other words, you would spend sell British pounds and purchase U.S. dollars.
        The bid price is the price at which your broker is willing to buy base currency in exchange for quote currency. The bid is the best price at which you are willing to sell your quote currency on the market.
        The ask price, or the offer price, is the price at which your broker will sell base currency in exchange for quote currency. The ask price is the best available price at which you are willing to buy from the market.
        A spread is the difference between the bid price and the ask price.[1]
    2
    Read a forex quote. You'll see 2 numbers on a forex quote: the bid price on the left and the ask price on the right.
    3
    Decide what currency you want to buy and sell.
        Make predictions about the economy. If you believe that the U.S. economy will continue to weaken, which is bad for the U.S. dollar, then you probably want to sell dollars in exchange for a currency from a country where the economy is strong.
        Look at a country's trading position. If a country has many goods that are in demand, then the country will likely export many goods to make money. This trading advantage will boost the country's economy, thus boosting the value of its currency.
        Consider politics. If a country is having an election, then the country's currency will appreciate if the winner of the election has a fiscally responsible agenda. Also, if the government of a country loosens regulations for economic growth, the currency is likely to increase in value.
        Read economic reports. Reports on a country's GDP, for instance, or reports about other economic factors like employment and inflation, will have an effect on the value of the country's currency.[2]
    4
    Learn how to calculate profits.
        A pip measures the change in value between 2 currencies. Usually, 1 pip equals 0.0001 of a change in value. For example, if your EUR/USD trade moves from 1.546 to 1.547, your currency value has increased by 1 pip.
        Multiply the number of pips that your account has changed by the exchange rate. This calculation will tell you how much your account has increased or decreased in value.[3]

Part 2: Open an Online Forex Brokerage Account

    1
    Research different brokerages. Take these factors into consideration when choosing your brokerage:
        Look for someone who has been in the industry for 10 years or more. Experience indicates that the company knows what it's doing and knows how to take care of clients.
        Check to see that the brokerage is regulated by a major oversight body. If your broker voluntarily submits to government oversight, then you can feel reassured about your broker's honesty and transparency. Some oversight bodies include:
            United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
            United Kingdom: Financial Services Authority (FSA)
            Australia: Australian Securities and Investment Commission (ASIC)
            Switzerland: Swiss Federal Banking Commission (SFBC)
            Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
            France: Autorité des Marchés Financiers (AMF)
        See how many products the broker offers. If the broker also trades securities and commodities, for instance, then you know that the broker has a bigger client base and a wider business reach.
        Read reviews but be careful. Sometimes, unscrupulous brokers will go into review sites and write reviews to boost their reputations. Reviews can give you a flavor for a broker, but you should always take them with a grain of salt.
        Visit the broker's website. The website should look professional, and links should be active. If the website says something like "Coming Soon!" or otherwise looks unprofessional, then steer clear of that broker.
        Check on transaction costs for each trade. You should also check to see how much your bank will charge to wire money into your forex account.
        Focus on the essentials. You need good customer support, easy transactions and transparency. You should also gravitate toward brokers who have a good reputation.[4]
    2
    Request information about opening an account. You can open a personal account or you can choose a managed account. With a personal account, you can execute your own trades. With a managed account, your broker will execute trades for you.
    3
    Fill out the appropriate paperwork. You can ask for the paperwork by mail or download it, usually in the form of a PDF file. Make sure to check the costs of transferring cash from your bank account into your brokerage account. The fees can cut into your profits.
    4
    Activate your account. Usually, the broker will send you an email containing a link to activate your account. Click the link and follow the instructions to get started with trading.[5]

Part 3: Start Trading

    1
    Analyze the market. You can try several different methods:
        Technical analysis: Technical analysis involves reviewing charts or historical data to predict how the currency will move based on past events. You can usually obtain charts from your broker or use a popular platform like Metatrader 4.
        Fundamental analysis: This type of analysis involves looking at a country's economic fundamentals and using this information to influence your trading decisions.
        Sentiment analysis: This kind of analysis is largely subjective. Essentially, you try to analyze the mood of the market to figure out if it's "bearish" or "bullish." While you can't always put your finger on market sentiment, you can often make a good guess that can influence your trades.[6]
    2
    Determine your margin. Depending on your broker's policies, you can invest a little bit of money but still make big trades.
        For example, if you want to trade 100,000 units at a margin of 1 percent, your broker will require you to put $1,000 cash in an account as security.
        Your gains and losses will either add to the account or deduct from its value. For this reason, a good general rule is to invest only 2 percent of your cash in a particular currency pair.
    3
    Place your order. You can place different kinds of orders:
        Market orders: With a market order, you instruct your broker to execute your buy/sell at the current market rate.
        Limit orders: These orders instruct your broker to execute a trade at a specific price. For instance, you can buy currency when it reaches a certain price or sell currency if it lowers to a particular price.
        Stop orders: A stop order is a choice to buy currency above the current market price (in anticipation that its value will increase) or to sell currency below the current market price to cut your losses.[7]
    4
    Watch your profit and loss. Above all, don't get emotional. The forex market is volatile, and you will see a lot of ups and downs. What matters is to continue doing your research and sticking with your strategy. Eventually, you will see profits.

what is forex trading

op 7 Questions About Currency Trading Answered

Although forex is the largest financial market in the world, it is relatively unfamiliar terrain for retail traders. Until the popularization of internet trading a few years ago, FX was primarily the domain of large financial institutions, multinational corporations and secretive hedge funds. But times have changed, and individual investors are hungry for information on this fascinating market. Whether you are an FX novice or just need a refresher course on the basics of currency trading, read on to find the answers to the most frequently asked questions about the forex market.

Tutorial: The Ultimate Guide To Forex Trading

How does the forex market differ from other markets?
Unlike stocks, futures or options, currency trading does not take place on a regulated exchange. It is not controlled by any central governing body, there are no clearing houses to guarantee the trades and there is no arbitration panel to adjudicate disputes. All members trade with each other based on credit agreements. Essentially, business in the largest, most liquid market in the world depends on nothing more than a metaphorical handshake.

At first glance, this ad-hoc arrangement must seem bewildering to investors who are used to structured exchanges such as the NYSE or CME. (To learn more, see Getting To Know Stock Exchanges.) However, this arrangement works exceedingly well in practice; because participants in FX must both compete and cooperate with each other, self regulation provides very effective control over the market. Furthermore, reputable retail FX dealers in the United States become members of the National Futures Association (NFA), and by doing so they agree to binding arbitration in the event of any dispute. Therefore, it is critical that any retail customer who contemplates trading currencies do so only through an NFA member firm.

The FX market is different from other markets in some other key ways that are sure to raise eyebrows. Think that the EUR/USD is going to spiral downward? Feel free to short the pair at will. There is no uptick rule in FX as there is in stocks. There are also no limits on the size of your position (as there are in futures); so, in theory, you could sell $100 billion worth of currency if you had the capital to do it. If your biggest Japanese client, who also happens to golf with the governor of the Bank of Japan tells you on the golf course that BOJ is planning to raise rates at its next meeting, you could go right ahead and buy as much yen as you like. No one will ever prosecute you for insider trading should your bet pay off. There is no such thing as insider trading in FX; in fact, European economic data, such as German employment figures, are often leaked days before they are officially released.

Before we leave you with the impression that FX is the Wild West of finance, we should note that this is the most liquid and fluid market in the world. It trades 24 hours a day, from 5pm EST Sunday to 4pm EST Friday, and it rarely has any gaps in price. Its sheer size and scope (from Asia to Europe to North America) makes the currency market the most accessible market in the world.

Where is the commission in forex trading?
Investors who trade stocks, futures or options typically use a broker, who acts as an agent in the transaction. The broker takes the order to an exchange and attempts to execute it as per the customer's instructions. For providing this service, the broker is paid a commission when the customer buys and sells the tradable instrument. (For further reading, see our Brokers And Online Trading tutorial.)

The FX market does not have commissions. Unlike exchange-based markets, FX is a principals-only market. FX firms are dealers, not brokers. This is a critical distinction that all investors must understand. Unlike brokers, dealers assume market risk by serving as a counterparty to the investor's trade. They do not charge commission; instead, they make their money through the bid-ask spread.

In FX, the investor cannot attempt to buy on the bid or sell at the offer like in exchange-based markets. On the other hand, once the price clears the cost of the spread, there are no additional fees or commissions. Every single penny gain is pure profit to the investor. Nevertheless, the fact that traders must always overcome the bid/ask spread makes scalping much more difficult in FX. (To learn more, see Scalping: Small Quick Profits Can Add Up.)

What is a pip?
Pip stands for "percentage in point" and is the smallest increment of trade in FX. In the FX market, prices are quoted to the fourth decimal point. For example, if a bar of soap in the drugstore was priced at $1.20, in the FX market the same bar of soap would be quoted at 1.2000. The change in that fourth decimal point is called 1 pip and is typically equal to 1/100th of 1%. Among the major currencies, the only exception to that rule is the Japanese yen. One Japanese yen is now worth approximately US$0.01; so, in the USD/JPY pair, the quotation is only taken out to two decimal points (i.e. to 1/100th of yen, as opposed to 1/1000th with other major currencies).

What are you really selling or buying in the currency market?
The short answer is "nothing". The retail FX market is purely a speculative market. No physical exchange of currencies ever takes place. All trades exist simply as computer entries and are netted out depending on market price. For dollar-denominated accounts, all profits or losses are calculated in dollars and recorded as such on the trader's account.

The primary reason the FX market exists is to facilitate the exchange of one currency into another for multinational corporations that need to trade currencies continually (for example, for payroll, payment for costs of goods and services from foreign vendors, and merger and acquisition activity). However, these day-to-day corporate needs comprise only about 20% of the market volume. Fully 80% of trades in the currency market are speculative in nature, put on by large financial institutions, multibillion dollar hedge funds and even individuals who want to express their opinions on the economic and geopolitical events of the day.

Learn to trade Forex with FXCM’s Free Trading Guide
Because currencies always trade in pairs, when a trader makes a trade he or she is always long one currency and short the other. For example, if a trader sells one standard lot (equivalent to 100,000 units) of EUR/USD, she would, in essence, have exchanged euros for dollars and would now be "short" euros and "long" dollars. To better understand this dynamic, let's use a concrete example. If you went into an electronics store and purchased a computer for $1,000, what would you be doing? You would be exchanging your dollars for a computer. You would basically be "short" $1,000 and "long" one computer. The store would be "long" $1,000 but now "short" one computer in its inventory. The exact same principle applies to the FX market, except that no physical exchange takes place. While all transactions are simply computer entries, the consequences are no less real.

Which currencies are traded in the forex market?
Although some retail dealers trade exotic currencies such as the Thai baht or the Czech koruna, the majority trade the seven most liquid currency pairs in the world, which are the four "majors":

    EUR/USD (euro/dollar)
    USD/JPY (dollar/Japanese yen)
    GBP/USD (British pound/dollar)
    USD/CHF (dollar/Swiss franc)

and the three commodity pairs:

    AUD/USD (Australian dollar/dollar)
    USD/CAD (dollar/Canadian dollar)
    NZD/USD (New Zealand dollar/dollar)

These currency pairs, along with their various combinations (such as EUR/JPY, GBP/JPY and EUR/GBP), account for more than 95% of all speculative trading in FX. Given the small number of trading instruments - only 18 pairs and crosses are actively traded - the FX market is far more concentrated than the stock market. (To read more, check out Popular Forex Currencies.)

What is a currency carry trade?
Carry is the most popular trade in the currency market, practiced by both the largest hedge funds and the smallest retail speculators. The carry trade rests on the fact that every currency in the world has an interest rate attached to it. These short-term interest rates are set by the central banks of these countries: the Federal Reserve in the U.S., the Bank of Japan in Japan and the Bank of England in the U.K.

The idea behind the carry is quite straightforward. The trader goes long the currency with a high interest rate and finances that purchase with a currency with a low interest rate. For example, in 2005, one of the best pairings was the NZD/JPY cross. The New Zealand economy, spurred by huge commodity demand from China and a hot housing market, saw its rates rise to 7.25% and stay there, while Japanese rates remained at 0%. A trader going long the NZD/JPY could have harvested 725 basis points in yield alone. On a 10:1 leverage basis, the carry trade in NZD/JPY could have produced a 72.5% annual return from interest rate differentials, without any contribution from capital appreciation. Now you can understand why the carry trade is so popular!

But before you rush out and buy the next high-yield pair, be aware that when the carry trade is unwound, the declines can be rapid and severe. This process is known as carry trade liquidation and occurs when the majority of speculators decide that the carry trade may not have future potential. With every trader seeking to exit his or her position at once, bids disappear and the profits from interest rate differentials are not nearly enough to offset the capital losses. Anticipation is the key to success: the best time to position in the carry is at the beginning of the rate-tightening cycle, allowing the trader to ride the move as interest rate differentials increase. (To learn more about this type of trade, see Currency Carry Trades 101.)

Forex Market Jargon
Every discipline has its own jargon, and the currency market is no different. Here are some terms to know that will make you sound like a seasoned currency trader:

what is forex trading

Everyone wishes to earn some extra money and if you are going through some rough financial crisis, then you need to figure out a safe business in which your investment will be secure and you will earn a lot through making right decisions.

Forex trading is one such solution which assures a safe investing business, where you can easily utilize your trading skills to earn a lot of profit. But before anything else if you are not familiar about the online trading, make sure that you gain ample knowledge before making your online account on any trading website. Etoro is one such website which gives you all the necessary details which you can use to start this lucrative online business of trading.

Every small trade can prove to be extremely effective, so if feel that your investment is very small and will not bring any big profit then you should think again. If you still feel that you don't have enough time for trading, then you need automated trading software which will take care of all your trading needs. All you need to do is understand the pulse of the market, once you get familiar with the buying and selling then you can easily set your trade and just forget about it. This way you just need to run the software and check it from to time to see if there was any profitable trade made, but if you feel that you can do better the you need to take things in your own hand.

You need to keep an eye on the time frame because timing is everything while trading, at any phase of time the value of certain goods may boost and if you trade the right currency pairs then you have a great chance to earn some serious cash. Once you start trading you constantly need to analyze your trading stats because they will help you trade much effectively. Forex trading gives you an exciting option to learn from your mistakes so that you could see where your money came from or where you lost it!

This way you will know about all the currency pairs which will prove to be most beneficial along with the ones from which you will lose a lot of money. You will see many people doing online trading so learn from all the pros, take advantage of their skills so that you can also make the most out of this trading business. Now that you have decided to earn some serious cash through trading, you need to watch all the market news so that you may know when the right time to trade is and when to avoid it. It is quite simple, everything is right in front of you and you have to analyze the market through the local news. You don't need to watch television all day, but keep notes of all the important facts that may help you while trading.

The forex trading can be very attractive business and you can easily start overtrading; now this can be very harmful and you can easily lose all your investment. Never try to take unnecessary risks, build your skills and when you are absolutely sure that your risk will pay off only then go for it. Your trading strategy is very crucial and many online trading businesses offer their experts to guide you throughout the all-important process of trading.

Always trust an established company which has been operating for many years, remember the trading business is not as complex as it seems. You need to spend couple of hours before getting all the necessary information, within such a short time you can open your account to start a whole new business. If you feel that times are getting harder and your financial situation is getting worse, then this trading just might be the perfect opportunity to turn things around. Once you have all the relevant information, then go ahead and open an account. After this process, just deposit the funds and start the trading process; everything depends on the strategy so to ensure that you don't risk your investment make sure that you have the best game plan. Enjoy the ultimate experience of forex trading and start making some serious cash.
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The currency trading market is the largest in the world and one of the most busiest. Billions of dollars are transacted every day. It is also the only market which is open round the clock, throughout the year. What this also means is that it offers plenty of more opportunities to make money , when compared to other forms of trading. It is not surprising then that hundreds and thousands of investors are trying entering the field every passing day. If you are an aspiring trader then you could very well do with some handy forex tips. There are various sources from .

What is FX trading

Currency trading or forex trading is the simultaneous buying of one currency and selling of another.

Currencies are quoted in pairs, for example, Euro / US Dollar, and investors can speculate on changes in the relative prices between the two currencies. When one currency in the pair increases in value, it strengthens against the other. Currency trading is a popular way to trade on financial markets as it is a truly 24-hour market. Foreign exchange trading opens at 9pm on Sunday evenings and trades continuously through until 9pm on Friday evenings (GMT).

With currency pairs, the first currency is often referred to as the base currency and the second currency is referred to as the quote currency. In any price quote, the figure tells you how much you would receive of the quote currency for one unit of the base currency.

For example, a quotation of EUR/USD 1.36568 means that one euro is exchanged for 1.36568 US dollars.

What is FX trading

Currency trading, or foreign exchange trading, is the simultaneous buying of one currency and selling of another.

Currencies are quoted in pairs, for example, euro / US dollar, and investors can speculate on changes in the relative prices between the currencies. When one currency in the pair increases in value, it strengthens against the other. Currency trading is a popular way to trade on financial markets as it is a truly 24-hour market. Foreign exchange trading opens at 08:00 Sydney Time on Monday and trades continuously through until 08:00 Sydney Time on Saturday.

With currency pairs, the first currency is quite often referred to as the base currency and the second currency is referred to as the quote currency. In any price quote, the figure tells you how much you would receive of the quote currency for one unit of the base currency.

For example, a quotation of EUR/USD 1.3656 means that one euro is exchanged for 1.3656 US dollars.

What Is FOREX Trading and How Does It Work

Before you can test the waters with a demo account, learning basic information about the FOREX markets is essential.

Foreign exchange is the simultaneous buying of one currency and selling of another. Currencies are traded through a broker or dealer and are executed in currency pairs, for example, the European Euro and the U.S. Dollar (EUR/USD) or the British Pound and the Japanese Yen (GBP/JPY). If you buy the GBP/JPY, you are long the GBP and short the JPY; if you sell the GBP/JPY, you are short the GBP and long the JPY. An account is typically funded with the currency of your resident country. A few FOREX brokers offer the option of funding with a non-local currency.

It is important to understand a FOREX transaction is effectively a spread between two currencies. You cannot simply buy the USD or sell the JPY—the purchase or sale must be in relationship to another currency. This is one of two important facts to remember as we delve into the world of foreign exchange trading.

FOREX means FOReign EXchange. The FOREX (FX) market is a more-than-$4-trillion-a-day financial market, dwarfing everything else, including stocks and futures. Because there is no centralized exchange or clearinghouse for currency trading, the FOREX market is currently less regulated than other financial markets. The FOREX (FX) market is also more than three times the total amount of the stocks and futures markets combined and almost a doubling in the past five years.

Unlike other financial markets, the FOREX spot market has neither a physical location nor a central exchange. It operates through an electronic network of banks, corporations, and individuals trading one currency against another. The lack of a physical exchange enables the FOREX market to operate on a 24-hour basis, spanning all time zones across the major financial centers. This fact—that there is no centralized exchange—is the second important fact permeating all aspects of the FOREX experience.

There are a wide variety of reasons to consider FOREX trading, including high leverage and low costs. The ability to set one’s own trading times, lot sizes, and time frames makes it a something-for-everybody opportunity. Access to the FOREX markets on the Internet has resulted in a great deal of interest by small traders previously locked out of this enormous marketplace. Always remember these two important points: (1) FOREX has no central clearinghouse and (2) a currency transaction is a spread between two currencies.

What is Forex Trading

FOREX — the foreign exchange market or currency market or Forex is the market where one currency is traded for another. It is one of the largest markets in the world.

Some of the participants in this market are simply seeking to exchange a foreign currency for their own, like multinational corporations which must pay wages and other expenses in different nations than they sell products in. However, a large part of the market is made up of currency traders, who speculate on movements in exchange rates, much like others would speculate on movements of stock prices. Currency traders try to take advantage of even small fluctuations in exchange rates.

In the foreign exchange market there is little or no 'inside information'. Exchange rate fluctuations are usually caused by actual monetary flows as well as anticipations on global macroeconomic conditions. Significant news is released publicly so, at least in theory, everyone in the world receives the same news at the same time.

Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar.

Unlike stocks and futures exchange, foreign exchange is indeed an interbank, over-the-counter (OTC) market which means there is no single universal exchange for specific currency pair. The foreign exchange market operates 24 hours per day throughout the week between individuals with Forex brokers, brokers with banks, and banks with banks. If the European session is ended the Asian session or US session will start, so all world currencies can be continually in trade. Traders can react to news when it breaks, rather than waiting for the market to open, as is the case with most other markets.

Average daily international foreign exchange trading volume was $4.0 trillion in April 2010 according to the BIS triennial report.

Like any market there is a bid/offer spread (difference between buying price and selling price). On major currency crosses, the difference between the price at which a market maker will sell ("ask", or "offer") to a wholesale customer and the price at which the same market-maker will buy ("bid") from the same wholesale customer is minimal, usually only 1 or 2 pips. In the EUR/USD price of 1.4238 a pip would be the '8' at the end. So the bid/ask quote of EUR/USD might be 1.4238/1.4239.

This, of course, does not apply to retail customers. Most individual currency speculators will trade using a broker which will typically have a spread marked up to say 3-20 pips (so in our example 1.4237/1.4239 or 1.423/1.425). The broker will give their clients often huge amounts of margin, thereby facilitating clients spending more money on the bid/ask spread. The brokers are not regulated by the U.S. Securities and Exchange Commission (since they do not sell securities), so they are not bound by the same margin limits as stock brokerages. They do not typically charge margin interest, however since currency trades must be settled in 2 days, they will "resettle" open positions (again collecting the bid/ask spread).

Individual currency speculators can work during the day and trade in the evenings, taking advantage of the market's 24 hours long trading day.

If you want to know more about how to start trading in Forex, please, proceed to our Forex for dummies article.

what is forex trading

Foreign exchange trading, which is commonly called forex trading, is the swapping of currencies from different countries. For example, you could trade US Dollars for Euros.

In the modern age of computers and digital trading, forex trading has become less dependent on a physical exchange of currencies. These days a trader can make a foreign exchange trade simply by placing an order using a computer. The trade can be held anywhere from minutes to years depending on the intention of the trader.

Reasons for Foreign Exchange Trading

Business Transactions
Actual foreign exchange trading is done by companies around the world every day in their normal course of business as they ship products to other countries. If a company in the US wants to buy a product from a company in Europe, they will usually need to exchange their US Dollars for Euros before the purchase. They can then pay the foreign company with Euros and receive their order.

Speculation
Foreign exchange trading is also conducted for speculative reasons, like profiting from price fluctuations. This type of trading is conducted by both institutions and individual traders on a daily basis. If a trader or organization expects the Euro to rise in value in relation to the US Dollar they would make a trade on a Euro/US Dollar trading pair called EUR/USD. This is not only buying Euros, but it is specifically trading Euros against US Dollars. It's called going long on EUR/USD. If the Euro increases in value against the US Dollar, the trader can end the trade resulting in an immediate profit. Changes in values are recorded in pips, which are 1/100th of 1 percent.

Foreign Exchange Pricing
Foreign exchange trading is conducted through a forex brokerage who receives prices from various banks over private networks. These networks are commonly called "The Interbank". While the interbank is not an actual single network, but rather a reference to individual networks that trade between each other. The prices between these banks can vary widely at any given moment.

Foreign exchange trading is now considered to be a common investment activity. Traders can trade against US Dollars, Euros, British Pounds, the Japanese Yen, the Australian Dollar, and many more. This type of trading was once reserved for banks and for the very rich, now a foreign exchange trading account can be opened with as little as $10 and some paperwork.

What is forex and forex trading

What is forex and forex trading
As you can imagine, forex trading is a bit more than just exchanging currencies for a holiday. Companies use different currencies to buy goods in other countries. In order to buy these goods, they need to obtain the local currency first, just like we would when going on holiday. The difference is that these companies will exchange huge amounts.
Currency exchange dollars to yen cars

With all of the exchanging of currencies happening around the world, the exchange rates are constantly moving. Here is how it works:
Trading currencies is like exchanging money while on holiday

When currencies are exchanged, they have a certain price: the exchange rate. As with the price of anything, the price for a currency is determined by the laws of supply and demand.

If there is high demand for a particular currency – for example, many people or companies want to change their domestic currency for the euro – the value of the euro will then increase and the exchange rate will change against other currencies. You can use this principle to make money. To illustrate, let's use the example of going on holiday.
Say you live in Europe and go on a holiday to the United States. You will want to exchange euros for US dollars. At the time you do this, you get $1.40 for one euro. You exchange €500, therefore receiving $700.

After two weeks, you head home, but you still have $250 left. As you have no use for dollars anymore, you change them back into euros.

You notice though, that the price of the euro against the dollar has changed – the exchange rate is now $1.30 for one euro, so you get approximately €190 back. Had the exchange rate stayed at $1.40, you would have only gotten €180 back. Therefore, you have actually made money.
Let’s say that you changed your €500 into US dollars and got $700, but you did not spend any money at all and came back with $700. After the exchange rate changed from $1.40 to $1.30, instead of getting €500 back, you actually receive €538.5. You have gained €38.5 simply from holding your money in dollars while the exchange rate changed. This is essentially how we trade in the currency market. We buy a certain amount of a currency, hold onto it until the exchange rate fluctuates, then change it back once the exchange rate has fluctuated, making money in the process.

You want to start learning how this works right away?

Using a bureau de change and saving a bit of money from your holiday budget is not a practical approach to forex trading. Fortunately, there is an easier way to do this: through online exchange offices called “brokers”.

What this means is that you can exchange currencies online and take advantage of the constantly changing exchange rates. Just like in the example of going on holiday, you can buy different currencies and make a profit as the exchange rates between the currencies change – this is trading the forex market.

Trading forex online has many benefits:
Trade alongside your job

    You can trade forex from your home or anywhere you have an Internet connection.
    The forex market never sleeps. It is open 24 hours a day during weekdays and can suit your daily routine.
    You do not need a huge budget to get started. As little as $150 is enough to begin trading and building your account over time.

Trading forex will not make you rich overnight, yet it can provide an income stream alongside your normal job. It can even turn into a business, depending on how much time you are willing to invest.

Of course, it will require some effort to get there, but this is exactly what tradimo is here for – to help you learn how to trade in a way that will suit your individual lifestyle and to help you navigate your way through the forex market.

What is forex trading

What is Forex Trading

You may have heard of Forex but don't know exactly what it is. Forex is short for foreign exchange - Forex trading therefore is investing in, or speculating on, the exchange rate or the price of national currencies. Just as an investor might trade shares, commodities, and government or corporate bonds, an investor can make informed guesses about the price fluctuations of foreign currencies.

The global Forex markets consist of the currency of every country, and are traded 24 hours a day, 5 days a week. Forex traders can operate from anywhere, even from home. The busiest time for Forex trading is when the USA session is just opening and the European session is closing, which is between 13:00 and 17:00 GMT. Currency prices move up and down very quickly during this time, which creates both opportunities and risks.

The fundamentals of Forex are not complicated: You buy a currency when it's low, sell when it's high, and take a profit. You can also make a profit by selling high and then buying low. This is called short selling. It takes time and practice to learn how to predict fluctuations in currency values and become successful in Forex trading. Many indicators can affect the price of a particular currency in relation to its value against other currencies - from national economic outlook to political change. A succesful Forex trader learns how to read these indicators. Traders have tons of educational material available on the web to develop their knowledge - check out the rest of the Admiral Markets' education section.

Forex is usually regarded as high risk for private investors but in the current economic climate it is becoming a more attractive option. Forex is not for the faint of heart but a skilled investor with the right tools and the right knowledge can be successful.

Forex has built-in advantages over other types of investment. In the Forex market, an investor can gear up or “leverage” in a way that is not possible in most other asset classes.

Think about buying a house. Generally, you may put down between 10 to 20 per cent of the overall price of the house. The rest of the money you borrow from the bank. Suppose you buy a house worth $100,000. You put down $20,000 and borrow the rest from the bank. Then suppose the price of that house goes up to $120,000 in six months, which is very possible in a rising market. You can then sell the house and double your money.

Forex works in the same way - and even more so: With foreign exchange you can control sums of money up to 500 times larger than your initial investment.

Forex has additional advantages over other types of financial instruments. Investors can enter the market with much smaller amounts of money, can sell out easily, and can short sell.

In the European Union, Forex is closely monitored and tightly regulated. The retail Forex market has grown rapidly in the past few years and it is the fastest growing financial area. One of the reasons for this fast growth ist the software that has revolutionized the industry in the past few years. Nowadays it is easier to execute trades - everyone who has access to the internet can buy and sell currencies within seconds at any time, in any place.

What is Forex Trading

What is Forex Trading

Foreign exchange, commonly known as ‘Forex’ or ‘FX’, is the exchange of one currency for another at an agreed exchange price on the over-the-counter (OTC) market. Forex is the world’s most traded market, with an average turnover in excess of US$4 trillion per day.

Compare this to the New York Stock Exchange, which has a daily turnover of around US$50 billion and it’s easy to see how the foreign exchange market is the biggest financial market in the world.

Essentially, forex trading is the act of simultaneously buying one currency while selling another, primarily for the purpose of speculation. Currency values rise (appreciate) and fall (depreciate) against each other due to a number of factors including economics and geopolitics. The common goal of forex traders is to profit from these changes in the value of one currency against another by actively speculating on which way forex prices are likely to turn in the future.

Unlike most financial markets, the OTC (over-the-counter) forex market has no physical location or central exchange and trades 24-hours a day through a global network of businesses, banks and individuals. This means that currency prices are constantly fluctuating in value against each other, offering multiple trading opportunities.
24-Hour Forex Trading

One of the key elements behind forex’s popularity is the fact that forex markets are open 24-hours a day from Sunday evening through to Friday night. Trading follows the clock, opening on Monday morning in Wellington, New Zealand, progressing to Asian trade spearheaded out of Tokyo and Singapore, before moving to London and closing on Friday evening in New York.

The fact that prices are available to trade 24-hours a day helps to ensure that price gapping (when a price jumps from one level to the next without trading in between) is less and ensures that traders can take a position whenever they want, regardless of time, though in truth there are certain ‘lull’ times when volumes are below their daily average which can widen market spreads.
Leverage

Foreign exchange is a leveraged (or margined) product, which means that you are only required to deposit a small percentage of the full value of your position to place a forex trade. This means that the potential for profit, or loss, from an initial capital outlay is significantly higher than in traditional trading. Find out more about risk management.

Volatility in the forex markets can bring ample opportunity to speculate and profit from forex price movements. However, there is always the possibility that your trades could go against you and this could net you a loss. Trading forex carries a higher degree of risk and is not suitable for all investors.

Pricing

All forex is quoted in terms of one currency versus another. Each currency pair has a ‘base’ currency and a ‘counter’ currency. The base currency is the currency on the left of the currency pair and the counter currency is on the right.

For example, in EUR/USD, EUR is the ‘base’ currency and USD the ‘counter’ currency. Forex price movements are triggered by currencies either appreciating in value (strengthening) or depreciating in value (weakening). If, for example, the price of EUR/USD was to fall, this would indicate that the counter currency (US dollar) was appreciating, whilst the base currency (Euro) was depreciating.

When trading forex prices, you would buy a currency pair if you believed that the base currency would strengthen against the counter currency. Alternatively, you would sell a currency pair if you believed that the base currency would weaken in value against the counter currency. Some examples of major currency pairs are:

    EUR/USD (The value of 1 EUR expressed in US dollars)
    USD/CHF (The value of 1 USD expressed in Swiss francs)

Pips (Percentage in Points)

Pip stands for Percentage in Points. Most of our currency pairs are quoted to 5 decimal places with the change from the 4th decimal place (0.0001) in price commonly referred to as a ‘pip'. For example, if the price of the EUR/USD forex pair moved from 1.41800 to 1.41920, it is said to have climbed by 12 ‘pips’ (92-80=12).
Spread

The difference in the BID/ASK of the currency pairs is referred to as the 'spread'. An example would be EUR/USD dealing at 1.41800/1.41808 (in this case the spread is 0.8 pips or 0.00008). The exceptions to this are the JPY pairs which are quoted to just 2 decimal places. A USD/JPY price of 76.41/76.44 displays a 3 pip 'spread'.

What affects forex prices?

Forex prices are influenced by a multitude of different factors, from international trade or investment flows to economic or political conditions. This is what makes trading forex so interesting and exciting. High market liquidity means that prices can change rapidly in response to news and short-term events, creating multiple trading opportunities for retail forex traders.

Some of the key factors that influence forex prices are:

    Political and economic stability
    Monetary policy
    Currency intervention
    Natural disasters (earthquakes, tsunamis, etc.)

What is Forex

What is Forex
What Am I Doing When I Trade Forex

Forex is a commonly used abbreviation for “foreign exchange,” and it is typically used to describe trading in the foreign exchange market by investors and speculators.

For example, imagine a situation where the U.S. dollar is expected to weaken in value relative to the euro. A forex trader in this situation will sell dollars and buy euros. If the euro strengthens, the purchasing power to buy dollars has now increased. The trader can now buy back more dollars than they had to begin with, making a profit.

This is similar to stock trading. A stock trader will buy a stock if they think its price will rise in the future and sell a stock if they think its price will fall in the future. Similarly, a forex trader will buy a currency pair if they expect its exchange rate will rise in the future and sell a currency pair if they expect its exchange rate will fall in the future.
What Is An Exchange Rate?

The foreign exchange market is a global decentralized marketplace that determines the relative values of different currencies. Unlike other markets, there is no centralized depository or exchange where transactions are conducted. Instead, these transactions are conducted by several market participants in several locations. It is rare that any two currencies will be identical to one another in value, and it’s also rare that any two currencies will maintain the same relative value for more than a short period of time. In forex, the exchange rate between two currencies constantly changes.

For example, on January 3, 2011, one euro was worth about $1.33. By May 3, 2011, one euro was worth about $1.48. The euro increased in value by about 10% relative to the U.S. dollar during this time.
Why Do Exchange Rates Change?

Currencies trade on an open market, just like stocks, bonds, computers, cars, and many other goods and services. A currency’s value fluctuates as its supply and demand fluctuates, just like anything else.

An increase in supply or a decrease in demand for a currency can cause the value of that currency to fall.
A decrease in the supply or an increase in demand for a currency can cause the value of that currency to rise.

A big benefit to forex trading is that you can buy or sell any currency pair, at any time subject to available liquidity. So if you think the Eurozone is going to break apart, you can sell the euro and buy the dollar (sell EUR/USD). If you think the price of gold is going to go up, based on historical correlation patterns you can buy the Australian dollar and sell the U.S. dollar (buy AUD/USD).

This also means that there really is no such thing as a “bear market,” in the traditional sense. You can make (or lose) money when the market is trending up and down.

Why Trade Forex !

as become very popular in the past decade because it offers traders several advantages:
Forex never sleeps

Trading goes on all around the world during different countries’ business hours. You can, therefore, trade major currencies at any time, 24 hours per day. Since there are no set exchange hours, it means that there is also something happening at almost any time of the day or night.1
Go long or short

Unlike many other financial markets, where it can be difficult to sell short, there are no limitations on shorting currencies. If you think a currency will go up, buy it. If you think it will fall, sell it. This means there is no such thing as a “bear market” in forex - you can make (or lose) money any time.
Low trading costs

Most forex accounts trade without a commission and there are no expensive exchange fees or data licenses. The cost of trading is the spread between the buy price and the sell price, which is always displayed on your trading screen.
Unmatched liquidity

Because forex is a $4 trillion a day market, with most trading concentrated in only a few currencies, there are always a lot of people trading. This makes it typically very easy to get in to and out of trades at any time, even in large sizes.
Available leverage

Because of the deep liquidity available in the forex market, you can trade forex with considerable leverage (up to 50:1). This can allow you to take advantage of even the smallest moves in the market. Leverage is a double-edged sword, of course, as it can significantly increase your losses as well as your gains.
International exposure

As the world becomes more and more global, investors hunt for opportunities anywhere they can. If you want to take a broad opinion and invest in another country (or sell it short!), forex is an easy way to gain exposure while avoiding vagaries such as foreign securities laws and financial statements in other languages.

op 7 Questions About Currency Trading Answered

What affects forex prices?

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