FOREX: The Trading Basics - Online Currency Business - Money Market

The Trading Basics:

FOREX is an international off-exchange market with a daily turnover of more than 3 trillion dollars. The name “ Forex ” comes from the phrase “ FOR eign EX change”, meaning an international currency exchange.
The major participants of this market are the world’s largest banks, which buy and sell different currencies, raw materials, gold, oil, shares and CFD for futures. All banks are united in a global informational network with no reference to any particular country, which allows the online exchange market to operate 24/7.

Other participants in the global financial network are Forex Brokers; companies providing services at the exchange market to anyone who is hoping to profit from changes in currency rates.
Trading operations are carried out by means of specific trading terminals connected to the server of a Forex broker via the Internet. These terminals can be used not only for online trading, but for getting the latest market news, performing online Forex analysis and making forecasts, as well as monitoring currency rates and prices for stock and raw materials.

The main advantage of Forex trading is that you require a relatively small initial deposit to start trading. Some brokers even allow individuals to open free live account with no money down and trade using welcome bonus. Traders can make money from any location even while staying at home. The high risks of trading can always be minimized, if you approach them in the right way.
Success in online currency trading is not determined by your age, gender, social status or nationality, as everyone has equal opportunities and you are the only person you depend on. However, you should never consider Forex to be an easy way of making money and forget about the specific features of Forex market. You must carefully study all aspects of the foreign exchange market, such as the behavior of a particular currency pair, future or CFD. Remember, your knowledge is the key to success.

Studying the Forex market will help you understand how the global economy works, learn more about the processes in international financial markets and find out about advantages and disadvantages of existing trading strategies. By improving your Forex knowledge you will be able to use technical indicators, wave and graphical analysis, and other methods of market research. The knowledge you acquire during this process will help you develop your own system of risk-management, which is the key to any successful online trading system..



Why Trade Foreign Currency?
  • No Middle men
  • High Liquidity
  • A 24-hour market
  • Low transaction costs
  • Free Demo Accounts, News, Charts and Analysis for starters and smart traders.
  • Leverage: In Forex trading, a small margin deposit can control a much larger total contract value. For example, Forex brokers offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable trader to buy or sell $10,000 worth of currencies.
  • No fixed lot size: In forex trading, you determine your own lot size. This allows traders to participate with small accounts.
  • “Mini” and “Micro” Trading for starters and pro alike.

How to read Forex Quotes:
Currencies are always quoted in pairs, such are GBP/USD or USD/JPY. The reason they are quoted in pairs is because in every foreign exchange transaction you are simultaneously buying one currency and selling another.
For example, for exchange rate for the British pound versus the U.S. dollar: [GBP/USD = 1.7500].
The first listed currency (GBP) known as the base currency, while the second one (USD) is called the counter or quote currency.
When buying, the exchange rates tells you how much you have to pay in units of the quote currency to buy one unit of base currency. The quote above shows that you pay 1.7500 U.S. dollars to buy 1 British pound.

When selling, the exchange rate tells you how many units of the quote currency you get for selling one unit of the base currency. In the example above you will receive 1.7500 U.S. dollars when you sell 1 British pound. The base currency is the “basis” for the buy or sell.

Long/Short: If you are buying in forex  market (which actually means buy the base currency and sell the quote currency) in anticipation that the base currency will rise in value and you would sell it back at higher price, you are taking a “long position”. Note: LONG=BUY.
If you are selling (which actually means sell the base currency and buy the quote currency) in anticipation that the base currency will fall in value and then you would buy it back at lower price, you are taking a “Short position”. Note: SHORT=SELL.

Bid/Ask Spread: All Forex  quotes include a two-way price, the bid and ask(offer). The bid is always lower than the ask price.
Bid is the price in which the dealer is willing to buy the base currency in exchange for the quote currency.
Ask (Offer) is the price in which the dealer will sell the base currency in exchange for the quote currency.
Spread is the difference between the bid and the ask price..


Also Read..» Technical Analysis in Forex Trading..