| What is Forex Trading? | | | | profit in a rising or a falling market. |
| Forex, or Foreign Exchange, is the | | | | Trends. Fundamentally, the value of a |
| simultaneous exchange of one country's | | | | country's currency is determined by |
| currency for that of another. This | | | | interest rates and the strength of the |
| market of exchange has more daily | | | | economy in relation to other countries. |
| volume, both buyers and sellers, than | | | | Currencies, therefore, have a greater |
| any other in the world. Taking place in | | | | tendency to trend until the fundamentals |
| the major financial institutions across | | | | change. |
| the globe, the forex market is open the | | | | What are the disadvantages of forex |
| full 24-hours a day. Forex currency | | | | trading? |
| trading takes place around the world, | | | | Leverage can be a two headed sword. With |
| across the time zones of the globe. | | | | huge leverage available to forex traders |
| You should know that currencies are | | | | the danger is that positions which carry |
| quoted in pairs. The first listed | | | | too much risk for the account size can |
| currency is known as the base currency, | | | | be taken on, leading to margin calls. |
| while the second is called the counter | | | | Effective money management rules must be |
| or quote currency | | | | adhered to. |
| In the wholesale market, currencies are | | | | Brokers. Retail traders must use a |
| quoted using five significant numbers, | | | | broker rather than dealing directly in |
| with the last placeholder called a pip | | | | the interbank market. The broker will be |
| or the point. | | | | the counterparty in all transactions and |
| The forex market has become the most | | | | is, effectively, making the market. They |
| popular of markets for speculation due | | | | can, therefore, widen spreads or even |
| to its enormous size, liquidity, and | | | | refuse to trade during volatile trading |
| tendency for currencies to move in | | | | conditions. To avoid dealing with |
| strong trends. A most enticing aspect of | | | | brokers an alternative to forex is to |
| trading currencies is the high degree of | | | | use futures. |
| leverage available. | | | | Spreads. As the retail trader must use a |
| What are the advantages of forex | | | | broker to trade, they cannot deal at the |
| trading? | | | | interbank rates. A broker will generally |
| Leverage. Huge leverage is available in | | | | quote a fixed spread of 3-20 pips |
| Forex trading, often up to 100:1 meaning | | | | depending on the currency pair. The |
| that large profits can be generated from | | | | underlying interbank rate might be as |
| even small margin deposits. | | | | little as 1 pip. |
| Liquidity. The enormous size and global | | | | Forex is a very large market but for |
| trading of the forex markets means that | | | | most retail traders dealing with brokers |
| the markets in the major currency pairs | | | | the odds are shifted against them. |
| are very liquid making trade executions | | | | Online futures trading provide a much |
| almost instantaneous with little | | | | more level playing field for most |
| slippage. This is due to a great extent | | | | traders who want to take part in forex |
| to the rapid communication systems that | | | | trading. |
| are available worldwide. | | | | Forex or Currency trading can be an |
| Ability to go short. Since currency | | | | exciting way to make your fortune. |
| trading always involves buying one | | | | Prepare and understand the concepts and |
| currency and selling another, there is | | | | risk factors involved. |
| no structural bias to the market. This | | | | Remember that a knife can cut both ways |
| means a trader has equal potential to | | | | ? for you or against you . |