Most beginner investors are familiar with the stock market. as well as bonds and mutual funds, but there are a variety of other investments to take advantage of, too-one of the biggest and oldest being the foreign exchange market.

What is the Foreign Exchange Market?

The foreign exchange market, also known as the Forex market . is a venue for investors looking to exchange one foreign currency for another. Similar to other markets, investors can sign up with an online brokerage company and allow that company to buy and sell different currencies on their behalf.

Once an account has been set up with a reputable company, you can place your money in an account and begin trading with a foreign currency you feel will be profitable.

However, in order to trade, you must understand currency codes: The three-letter symbols that represent a particular currency. There are about 15 main currencies that are the most popular in Forex trading :

• U.S. dollar (USD)
• Euro (EUR)
• Japanese yen (JPY)
• Pound sterling (GBP)
• Australian dollar (AUD)
• Swiss franc (CHF)
• Canadian dollar (CAD)

• Hong Kong dollar (HKD)
• Swedish krona (SEK)
• New Zealand dollar (NZD)
• South Korean won (KRW)
• Singapore dollar (SGD)
• Norwegian krone (NOK)
• Mexican peso (MXN)
• Indian rupee (INR)

To execute a trade, the codes are placed together in what are known as currency pairs. For example, GBP/USD means you want to either buy or sell the British pound sterling against the U.S. dollar. This trade will apply even if the money you have to trade in your account is from another currency type, such as Japanese yen (JPY).

Similar to the stock exchange, investors are able to make money by watching exchange rates fluctuate. Generally, the goal is to buy currency at a low price then sell it high. Understanding how to trade on the Forex market usually requires learning the basics of trading and gaining insight through Forex market analysis .

Is Now a Good Time to Trade Currencies?

Theres no doubt there has been economic turmoil all over the world. Greece struggled with a debt crisis for months, while the United States narrowly missed its own debt crisis this summer and came close to default on Aug. 3.

Since the U.S. debt crisis in particular had effect on all financial markets, especially with the downgrade to its AAA rating, some have wondered whether this is a bad time to participate in Forex trading.

Indeed, markets have been turbulent, but one of the rules of investing is that you dont pull out just because the market takes a downturn. Investing is a long-term strategy, and there are numerous benefits to investing in the Forex market.

Benefits of Forex Trading

• 24-hour trading: The market is open Sunday 5 p.m. to Friday 4p.m. EST, 24 hours a day. This differs from the stock exchange, which is open from 9:30 a.m. to 4 p.m. EST with pre-market trading from 7:30 a.m. to 9:30 a.m.
• Online-only trading: Because Forex trading occurs online, investors can trade freely from anywhere using the internet.
• No commission: Unlike other forms of trading, there is no commission involved in the foreign exchange market. However, there may be low transition costs to consider.
• Large quantity market: The daily turnover for the Forex market is very highin the ballpark of $3 trillion per day.

Keep in mind that while Forex trading offers a number of benefits, it is also one of the riskier forms of investing. Its leveraged nature means market movement could result in a total loss of your deposits. If you cant meet a margin call within a specified time period, your position could be liquidated, meaning you are responsible for any resulting losses.

What it Takes to Learn Forex Trading

If, with everything youve learned, you like the sound of the Forex investment. you may be wondering how you can get involved.

Most people who get started are eager to find out how they can quickly gain an advantage in currency trading. Unlike the stock market, however, that often has insider tips from people who work within companies on the market, there are no known insider tips for Forex traders.

As a result, most have to learn Forex trading on their own by using technical analysis, which means to predict the direction of the price by using a price chart, as well as fundamental analysis, which means to predict the price according to economics and politics.

Also, some brokerage firms allow traders to practice for free with play money for up to 30 days. During this trial period, traders get to take advantage of all the benefits of paying members, including real market conditions, market quotes, daily news and customer service assistance.

The best way to acquire Forex training is by diving in and getting starting with real or play money. For many, its a great market to participate in. See for yourself if its the right market for you.