As popular as FX trading is, many people still don’t know what Forex Trading is, or even if known, many still are unaware on how to start trading in the Forex market. This article is part one of a two-part series on how to start trading currencies, and how to profit from the largest financial market in the world.
What Is FOREX Trading?
Forex trading is the simultaneous purchase of one currency and the sale of another;the F a market where currencies of nations are traded.
ForEx trading is an abbreviation for Foreign Exchange trading, and takes place in a market where currencies of nations are traded.
Foreign Exchange is the biggest market in the world and it offers investors/traders an incredible opportunity for profit whichever direction the market moves.
(According to the Bank for International Settlements, the preliminary global results from the 2013 Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Markets Activity show that trading in foreign exchange markets averaged $5.3 trillion per day in April 2013; Source: www.wikipedia.com).
Each currency is represented by an ISO 4217 symbol. ISO 4217 is a standard published by the International Organization for Standardization to provide an abbreviated currency symbol. See some examples below:
AUD Australian Dollar
CAD Canadian Dollar
EUR Europe
GBP Pound
USD United State Dollar
For a full current currency code list, visit https://en.wikipedia.org/wiki/ISO_4217
For the purpose of ForEx trading, currencies are always quoted in pairs, e.g.EUR/USD, GBPUSD, USD/CAD, AUD/USD, USD/JPY, GBP/JPY, EUR/JPY, NZD/USD etc
The currency on the left of the / is called the “base currency” and the currency on right of the / is called the “counter currency”.
In trading, when you place an order to buy the EUR/USD, you are actually buying the EUR and selling the USD, if you were to sell the pair, you would be selling the EUR and buying the USD.
Example: suppose you had $1000 and bought the Euro when the exchange rate was 1.50 Euros to one dollar, you would then have 1,500 Euros. If the value of the Euro against the US dollar increased then you could sell (exchange) your Euros for dollars and end up with more dollars than you started with.
Benefits of Trading in the Forex Market
There are many features of Forex Trading that one might benefit from; some of these features are described below:
High Liquidity Market
The Forex Market turnover value is about $5.3 trillion per day, it is the largest traded market in the world, with huge liquidity! This enables traders/investors to easily cash in or cash out their capital in Forex market.
Centralized location
Unlike other financial markets that operate at a centralized location (e.g. the stock exchange), the worldwide Forex market 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. This feature allow the investors/traders to trade from any location, as long as there is internet connectivity. A computer/laptop with a stable Internet connection plus an active Forex account are sufficient for you to execute a trade in the Forex market.
24 hour market
Another major feature of the Forex market is that it operates 24 hours a day from when the market opens at 22.00hrs GMT on Sunday until 22.00hrs GMT on Friday, corresponding to the opening and closing of financial centers in countries all across the world. The market starts trading each day in Sydney, then in Tokyo, Frankfurt, 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.
Profit potential in Rising or Falling Market Trends
No matter what direction the market is trending, there is always the potential to make a profit.
To conclude this part, access to the Forex market has been made available only to banks and other large financial institutions previously. However with advances in technology over the years’, 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. Learn how to trade with Alphafx.biz and become an active trader in the largest market on the planet.
