What is Foreign Exchange?

June 5, 2010

Foreign Exchange, commonly known as FX or Forex, is the platform where one nations currency is exchanged for another. With 3 trillion dollars being traded by traders and brokers all over the world foreign exchange is a huge platform of opportunities for making money.

Foreign exchange is also known as FX or Forex and is a 24/7 exchange market with no land based or centralized office or zone for trading. Also, Forex has no bull and bear dominance making the whole currency buying and selling a comfortable process.

In Forex the trading is done with currency pairs and these currency pairs are present in two group ‘Majors’ and ‘Minors’. The profit in trading Forex pairs comes when you buy one pair and sell a currency against another, thus the key to profit lies in purchasing low rate currency and selling it against the high rate or well doing currency.

Some of the four famous ‘Major’ pairs are:

Euro and USD (EUR/USD),

British Pound and USD (GBP/USD)

Swiss Frank (USD/CHF)

Japanese Yen (USD/JPY), USD

The basic towards earning profit in trading pairs can be easily explained by the following example.

To find out when and how to buy and sell a currency you need to have a good knowledge of Forex trend, market situation and fundamental as well as technical analyses of the foreign exchange trading.

With brokers and trader dealing involved on large basis it is important for a trader to choose the right broker for a successful trading in FX market. If you have found a good broker who has the art of turning your trade to a profitable side trading in foreign exchange can be a good experience.

This Interbank/Interdealer market can be managed successful if you have a complete knowledge and idea about what you are in to.

No doubt foreign exchange is a not a game and needs expertise to make it to a successful level, but with right guidance, good broker and careful usage of various tools (demo account, stop loss and etc) you can always learn and move on to making it big in the world’ largest economic market.

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Forex Software

June 5, 2010

Forex trading software helps investors working in the sometimes complicated area of foreign exchange transactions and should be looked at by all serious investors.

For the investor who is interested in acquiring forex trading software there are many good options. Checking with a financial advisor you trust to see what forex trading software he or she recommends can be a good place to start.

Simply posting a message on the group asking what forex trading software is poplar and what the advantages and disadvantages of each program are can add to a person’s knowledge base and allow him or her to make a good decision when purchasing forex trading software.

Remember also that some specific forex trading software programs are available for short free trial periods. Experimenting with several programs will help an investor make a decision as to which forex trading software will offer the options and ease of use desired.

Often this is available for quick and easy download to your home computer and is already set up for optimum operation with the system with which you are working.

If your company does not provide forex trading software they probably have programs that they can recommend, that they and their members have had good luck with in the past. Always ask what forex trading software they recommend before making a purchase.Since the companies that manufacture and market forex trading software are competing for your business their advertisements and websites will list many of the positive features of their product.

Remember that the many choices of forex trading software are there because individuals involved in forex trading have different needs and different preferences, so learning all you can about a program, and about the forex trading market itself before buying will always pay off.

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Learn Forex Trading and Multiply Your Wealth

June 5, 2010

The incentive to learn forex trading is the oldest incentive by far, the incentive to make profit. If you learn forex trading you are learning how to make your money make more money for you, the goal of all investors.

If you choose to learn forex trading online you are not alone since thousands of people choose this method every year.

When you learn forex trading in this fashion your virtual classmates could be from England, Hong Kong, Singapore, Paris, or any other exotic locale that you may have only read about in the past.

The ultimate goal of forex trading is to trade currency in a consistent manner that will result in profit.

This is the oldest rule of business, buy low and sell high. If you learn forex trading you’ll be able to do this on a scale you never would have thought possible, limited only by the amount of investment funds you have and by market conditions.

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WHAT IS FOREX CURRENCY TRADING?

June 5, 2010

If you read about investing, youve seen the word forex trading. But because forex doesnt get much publicity in the major publications and websites, many investors dont know that forex is just short for foreign exchange. So trading the forex market is simply trading foreign currencies.

As recently as ten years ago, currency trading had high barriers to entry, so only large banking and institutional firms had access to the tools and systems required to play in the forex trading game.

When buying and selling in the forex currency trading system market, youll see that there are four currency pairs that dominate the percentage of trades.

The goal when investing in currency is to be holding a currency that appreciates in value in relation to the other currencies. To use an overly simplistic example, if you bought 50 British Pounds for 100 US Dollars, held the Pounds for 1 week, and in that period the value of Pounds increased in relation to US Dollars, you could then convert those Pounds back into dollars for, say, $120.

Since every country trades on the FX market, and its open all day, the daily volume is roughly $1.2 trillion, which dwarfs that of the NYSE. Another comparison to make in order to truly realize the magnitude of the forex market is with the currency futures market (which has around 1% of the daily volume).

There is no central body or organization required to act as middleman. Trading circulates between major banking centers around the world.

Until recently, there were strict financial requirements and massive minimum transaction sizes which prevented individual investors from trading. But with the advent of the internet came the FX brokers. A forex currency broker is similar to an online stock trading account such as etrade.

Anybody can open an account and buy and sell in any quantity. Because the brokers have thousands of investors placing orders through them, they are able to meet the large minimum transaction size by purchasing in large blocks and distributing currency amongst the purchasing investors.

While it offers fantastic opportunity for wealth, it is also very easy to lose your shirt in a hurry. Before trading forex, do your homework and read as much as you can find before investing your hard earned money.

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Interest Rate Differentials

June 5, 2010

Different currencies pay different interest rates.

Although such interest rate differentials may not appear very large, they are of great significance in a highly leveraged position. For example, the interest rate differential between the US dollar and the Japanese yen has been approximately 5% for several years. In a position that can be supported by a 5% margin deposit, this results in a 100% profit on capital per annum when you buy the US dollar.

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Dealing Spread, but No Commissions

June 5, 2010

When trading foreign exchange, you are quoted a dealing spread offering you a buying and a selling level for your trade. Once you accept the offered price and receive confirmation from our dealers, the trade is done. There is no need to call an exchange floor. There are no other time-consuming delays.

The dealing spread is typically 3-5 points in normal market conditions. There are no further costs, commissions or exchange fees.

This ensures that you can get in and out of your trades at very low slippage and many traders are therefore active intra-day traders, given that a typical day in USDEUR presents price swings of 150-200 points.

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Base Currency and Variable Currency

June 5, 2010

When you trade, you will always trade a combination of two currencies. For example, you will buy US dollars and sell euro. But there is always a long (bought) and a short (sold) side to a trade, which means that you are speculating on the prospect of one of the currencies strengthening in relation to the other.

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