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Forex Market: Facts That Every Trader Needs To Know

April 27th 2009 04:03 am

In trading forex. there are many things that you should know in dealing with the forex market, and you also need to understand the nature of this niche if youre goal is to become successful in the business. For sure, you have come across some of those terminologies like currency market, forex and fx (shortcuts for foreign exchange), currency trading market, etc all of which are different names for the market. Generally, the forex market is an international market wherein the currencies of different countries are traded and exchanged.

Every nation in the world is involved in the market, so theres always the possibility of trading and exchanging currencies with most of the nations. Thats why it runs almost everyday, 24 hours a day and five days a week, starting at 5pm EST (Sunday) and concludes at 4pm EST (Friday), New York. And in here, currencies are being traded and exchanged.

The market began when the U.S. abandoned the gold standard (which gave every currency a value related to the U.S. dollar and was introduced for the purpose of stabilizing the world economy back then) and the values of all the other currencies had undergone change, with the banks opting to exchange currencies for profit (buying low and then selling high), rather than just being a passive means of transferring and exchanging money from one country to another country (and this made each currency a commodity that can be traded from then on).

Common exchanges/trading involve the U.S. dollar against other currencies like the British pound, euro, Australian dollar, Japanese yen and Swiss franc, but its always possible to trade any of these currencies with one another. The value of a currency determines the value of the nation: if one nation is successful, then its currency increases, but if it is undergoing crisis, the value decreases. Take note that these fluctuations can be huge and will happen very quick, with the sums of money involved being huge. Nowadays, the total worth of transactions in the market reaches almost around $2 trillion dollars per day.

International banks, major corporations, investment banks and other large financial institutions govern the forex market, but it is possible for a private individual to trade in the market through brokers (with the Internet, this has become very common today). Many who are involved in forex trading do business through their own PC at the comfort of their own homes (and they compose around 2 percent of the overall forex market). The forex robots/systems used by these individual traders concentrate on lesser pairs, like the British pound against the euro.

The forex market is truly a very big arena that will really dwarf the individual trader, but as long as you have the little capital that youre willing to risk in the process, then youre in! You can start with $250 in some cases. The forex demo account is great if you are one of the beginners in trading, as it will serve as a practice for you to learn the basic principles of the market, before you invest a single cent and go into real trading!

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