Currency Trading - Forex - Where Fortunes Are Made Everyday

Forex - Where Fortunes Are Made Everyday

The Foreign Exchange Market ? better known as FOREX - is a world wide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily exchanges are worth approximately $1.5 trillion (US dollars). In comparison, the United States Treasury Bond market averages $300 billion a day and American stock markets exchange about $100 billion a day.

The Foreign Exchange Market was established in 1971 with the abolishment of fixed currency exchanges. Currencies became valued at 'floating' rates determined by supply and demand. The FOREX grew steadily throughout the 1970's, but with the technological advances of the 80's FOREX grew from trading levels of $70 billion a day to the current level of $1.5 trillion.

The FOREX is made up of about 5000 trading institutions such as international banks, central government banks (such as the US Federal Reserve), and commercial companies and brokers for all types of foreign currency exchange. There is no centralized location of FOREX ? major trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris, and Frankfurt, and all trading is by telephone or over the Internet. Businesses use the market to buy and sell products in other countries, but most of the activity on the FOREX is from currency traders who use it to generate profits from small movements in the market.

Even though there are many huge players in FOREX, it is accessible to the small investor thanks to recent changes in the regulations. Previously, there was a minimum transaction size and traders were required to meet strict financial requirements. With the advent of Internet trading, regulations have been changed to allow large interbank units to be broken down into smaller lots. Each lot is worth about $100,000 and is accessible to the individual investor through 'leverage' ? loans extended for trading. Typically, lots can be controlled with a leverage of 100:1 meaning that US$1,000 will allow you to control a $100,000 currency exchange.

There are many advantages to trading in FOREX.

· Liquidity - Because of the size of the Foreign Exchange Market, investments are extremely liquid. International banks are continuously providing bid and ask offers and the high number of transactions each day means there is always a buyer or a seller for any currency.

· Accessibility ? The market is open 24 hours a day, 5 days a week. The market opens Monday morning Australian time and closes Friday afternoon New York time. Trades can be done on the Internet from your home or office.

· Open Market ? Currency fluctuations are usually caused by changes in national economies. News about these changes is accessible to everyone at the same time ? there can be no 'insider trading' in FOREX.

· No commission ? Brokers earn money by setting a 'spread' ? the difference between what a currency can be bought at and what it can be sold at.

How does it work?

Currencies are always traded in pairs ? the US dollar against the Japanese yen, or the English pound against the euro. Every transaction involves selling one currency and buying another, so if an investor believes the euro will gain against the dollar, he will sell dollars and buy euros.

The potential for profit exists because there is always movement between currencies. Even small changes can result in substantial profits because of the large amount of money involved in each transaction. At the same time, it can be a relatively safe market for the individual investor. There are safeguards built in to protect both the broker and the investor and a number of software tools exist to minimize loss.

This article may be freely distributed and reprinted as long as the author's information and web link are included at the bottom of the article.

Authored by:
William McNutt
Investment Made Easy

Bill McNutt is a retired Areospace Engineer. Retirement got boring so he took up web page building. He spends most of his time working on websites and writing articles.

Home Loans Made Easy
Which is Better Sauna or Steam Bath

Car Insurance | Car Rentals | Health Insurance | Weight Loss | Life Insurance

| 1 | 2 | 3 | 4 |

How Do Other Countries Devalue Their Currencies?
Countries devalue their currencies only when they have no other way to correct past economic mistakes - whether their own or mistakes committed by their predecessors.The ills of a devaluation are still at least equal to its advantages.True, it does encourage exports and discourage imports to some extents and for a limited period of time. As the devaluation is manifested in a higher inflation, even this temporary relief is eroded. In a previous article in this paper I described WHY governments resort to such a drastic measure. This article will deal with HOW they do it.A government can be forced into a devaluation by an ominous trade deficit. Thailand, Mexico, the Czech Republic - all devalued strongly, willingly...(related: Currency Trading)

Choosing A Forex Broker
With currency trading becoming ever more popular, the number of brokers is growing at a rapid rate. What should one look at when deciding which broker to open an account with? These are the important points to consider.SpreadBecause currencies, unlike futures and stocks, are not traded through a central exchange, the spread can be different depending on the broker you use, so it...(related: Currency Trading)

Forex Trading Philosophy
Keen on starting FOREX trading? Why would you not be? Many beginning FOREX traders are captivated by the allure of easy money. FOREX websites offer 'risk-free' trading, 'high returns' and 'low investment' ? these claims have a grain of truth in them, but the reality of FOREX is a bit more complex. As wit...(related: Currency Trading)

Ways To Acquire Discipline In Trading
One way to acquire discipline in trading..."Hey Joe! When you were teaching us at our Forex office in Florida, you stressed discipline. Our head trader stresses discipline. What I want to know is if discipline can be acquired or is it just something you are born with? I'm having trouble finding it in myself." - trader -Personally, I believe discipline can be learned, although at times it is very painful. When I began trading, I was a very undisciplined person. But trading and the markets forced me to become disciplined. Was the discipline alre...(related: Currency Trading)

Momentum Trading: A Practical Day Trading Strategy To Get Profits From Hot Stocks
Momentum day trading can be extremely profitable when done correctly...Day trading momentum stocks can be a very risky adventure. You can lose a lot of money when you pick the wrong opportunities.The stockmarket can present you with a lot of hot stocks every day. Some ...(related: Currency Trading)

Internet And Computer Systems In The Forex Business
With every passing year the interest in electronic trading is bigger, more especially trading shares and currency through Internet. A new profession came forward ? this of the currency dealer. The appearance of this profession was caused by the full force of development of Internet, which enabled the exchange business to be carried over at home or at the office. The electronic platforms offered by banks and investment brokers enables all of us to go in the sea of the financial markets and to start living a difference a...(related: Currency Trading)

Facts Of Day Trading
Are you thinking of entering the fast-paced world of day trading? Arm yourselves with the information from this fact sheet on day trading.What is day trading?Day trading is an investment tactic that does online daily stock trading with a relatively short investment. Those who do day trading usually buy and sell securities during the same market day and, as a general rule, do not hold stocks overnight. Many day traders make dozens of trades every market day hoping to capture profits that arise from small intraday price fluctuations.How is day trading different from swing trading?Day trading relatively holds the stock for only the day. After the stock market closes, a day trader has no stock in his hands. Swing trading h...(related: Currency Trading)

Forex Market Overview
"FX" is an abbreviation of "forex" or "foreign exchange." Foreign exchange is the largest and most liquid market in the world trading approximately $2 trillion every day (that's over 30 times the daily volume of NASDAQ...(related: Currency Trading)

Mechanical Or Discretionary Trading - Which Is Best?
Discretionary TradingPure discretionary trading will rely solely on the traders judgement. For example a discretionary trader may spot a particular pattern developing on a chart and decide to enter a trade on that basis. It would be impossible to systemise their trading because it relies on subjective jud...(related: Currency Trading)

How To Control Fear And Greed In Trading
There is an old saying that the market is driven by fear and greed. Anyone that has placed more than a couple of trades will surely have experienced these two emotions.All traders experience emotion. The distinction between a successful trader and an unsuccessful trader comes down to how they deal with that emotion. Let's look at how these emotions affect a successful trader and an unsuccessful trader in various scenarios:1. The trader's three previous trades have been losers. The unsuccessful trader will consider this before placing his next trade and be fearful that this trade will also end up a loser. This might result in a delay in placing the trade whilst waiting for the price to confirm that they were right - thus missing a perfectly good entry. They might suddenly discover that some other factor, previously u...(related: Currency Trading)

Day Trading Success- The Key Is Survival
Most new traders tend to focus just about all their time and energy on finding nearly perfect "setups", but trade setups, even very good ones, are *not* the key to successful trading. It's the *way* you trade your setups that keeps your losses smaller than your gains. And this is the single most essential key to trading success. To me, the process of limiting losses is more than just money management...it is survival.I can't give you a list ...(related: Currency Trading)

An Evaluation Of The Devaluation
A Minister of Finance is morally right to lie about a forthcoming devaluation and a woman has the right to lie about her age. This is the common wisdom.Rumours about a devaluation of the Macedonian Denar versus the major currencies were in the air during the last few weeks. Still, no government official had to lie. The market just did not believe it. The unofficial exchange rate stayed put at 27 MKD to the Deutschmark even as the devaluation was taking place.This is strange. Devaluation rumours are usually reflected in the street exchange rates. The MKD has held its turf against other currencies in the last three years. A devaluation s...(related: Currency Trading)

Forex Trading Online - 7 Reasons Why You Should!
Forex trading online is a fast way to use your investmentcapital to it's fullest. The Forex markets offer distinctadvantages to the small and large traders alike, makingForex currency trading in many ways preferable to othermarkets such as stocks, options or traditional futures. Hereare seven reasons why you'll want to look into Forex Tradingonline.1 - Forex is the largest market.Forex trading volume of more than 1.9 billion, more than 3times larger than the equities market and more than 5 timesbigger than futures, give Forex traders nearly unlimitedliquidity and flexibility.2 - Forex never sleeps!You can execute forex trading online 24/7, from 7AM NewZealand time on Monday morning, to 5PM New York time onFrid...(related: Currency Trading)