Start Trading The Forex Market – Your How To Guide Part One

What Is The FOREX or FOREX MARKET?

The Forex market (also referred to as the FX, Foreign Exchange or Currency Exchange) is the largest financial market in the world, with over $2 trillion changing hands every day.

That is larger than all US equity and Treasury markets combined!

Unlike other financial markets that operate at a centralized location (i.e. stock exchange), the Forex market is worldwide and therefore has no central location. It is a global electronic network of banks, financial institutions and individual traders, all involved in the buying and selling of national currencies. Another major feature of the Forex market is that it operates 24 hours a day, corresponding to the opening and closing of financial centers in countries all across the world, starting each day in Sydney, then Tokyo, London and New York. At any time, in any location, there are buyers and sellers, making the Forex market the most liquid market in the world.

Traditionally, access to the Forex market has been made available only to banks and other large financial institutions. With advances in technology over the last decade, however, the Forex market is now available to everybody, from banks to money managers to individual traders trading retail accounts. The time to get involved in this exciting, global market has never been better than now. Open Hydra Markets trading account and become an active player in the largest market on the planet. Visit www.hydramarkets.com to open a live or demo account and see what Forex is all about.

The Forex Market is very different than trading currencies on the futures market, and a lot easier, than trading stocks or commodities.

Whether you are aware of it or not, you already play a role in the Forex market. The simple fact that you have money in your pocket makes you an investor in currency, particularly in the Euro or US Dollar. By holding Euros or US Dollars, you have elected not to hold the currencies of other nations. Your purchases of stocks, bonds or other investments, along with money deposited in your bank account, represent investments that rely heavily on the integrity of the value of their denominated currency, mainly the US Dollar. Due to the changing value of the US Dollar and the resulting fluctuations in exchange rates, your investments may change in value, affecting your overall financial status. With this in mind, it should be no surprise that many investors have taken advantage of the fluctuation in Exchange Rates, using the volatility of the Foreign Exchange market as a way to increase their capital.

Example: suppose you had $1000 and bought Euros when the exchange rate was 1.10 Euros to the dollar. You would then have 1100 Euros. If the value of Euros against the US dollar increased then you would sell (exchange) your Euros for dollars and have more dollars than you started with.

Example:

You might see the following:EUR/USD last trade 1.1000 means 1 Euro is worth $1.10 US dollars.

The first currency (in this example, the EURO) is referred to as the base currency and the second (/USD) as the counter or quote currency.

The FOREX plays a vital role in the world economy and there will always be a tremendous need for the exchange of currencies. International trade increases as technology and communication increases. As long as there is international trade, there will be a FOREX market. The FX market has to exist so a country like Germany can sell products in the United States and be able to receive Euros in exchange for US Dollar.

Risk Warning:

The speculation of both leveraged foreign exchange (FX) and Contracts For Difference (CFDs) products is undertaken in order to potentially earn a profit from the price difference between the opening and closing of the transaction. Because leverage can work either in favour of or against the investor, FX and CFD transactions carry an extreme level of risk. For these reasons, FX and CFD trading may not be suitable for all investors as it is possible to lose a partial or full amount of the invested capital. You should only trade with capital that you are willing to lose. In addition, before making any trading decisions, it is highly suggested that you review the associated risks while taking into account your investment objects and level of experience. Past trading performance is not a reliable indicator of future performance. If you have any doubts, seek independent advice from a financial advisor.

About the Author