This article gives an introduction about the basics of
trading Forex online, a brief explanation of the markets
and the major benefits of trading forex online. Foreign
exchange or forex are all terms used to describe the
trading of the world's many currencies. The forex market is
the largest market in the world, with trades amounting to
more than 1.5 trillion dollars every day. The foreign
exchange market has no central clearing house or exchange
and is considered an over-the-counter (OTC) market. Forex
traders are generating incredible wealth day after day from
the comfort of their home. Foreign exchange is normally
traded on margin. A relatively small deposit can control
much larger positions in the market.
Forex trading takes place directly between the two
counterparts necessary to make a transaction, whether over
the telephone or on electronic brokerage networks all over
the world. This is a trade that includes simultaneous
buying of one currency and selling of another one. There
are two reasons to buy and sell currencies. About 5% of
daily turnover is from companies, and governments that buy
or sell products and services in a foreign country must
convert profits made in foreign currencies into their
domestic currency. The other 95% is trading for profit, or
speculation. The currency combination used in the trade is
called a cross (for example, the Euro/US Dollar, or the GB
Pound/Japanese Yen.).
The market is called the spot market because trades are
settled immediately, or "on the spot". One of the major
benefits of trading forex is the opportunity to trade 24
hours a day from Sunday evening (20:00 GMT) to Friday
evening (22:00 GMT). Unlike stock trading, currency trading
on the Forex market is not cut short at the "close" of each
day's trading. The benefit of Forex being a 24 hour a day
market is that there are little or no gaps in the market,
meaning there is no chance that prices will close one day
and reopen the next day. The fact that forex is often
traded without commissions makes it very attractive as an
investment opportunity for investors who want to deal on a
frequent basis.
Since the market is always moving, there are always trading
opportunities, whether a currency is strengthening or
weakening in relation to another currency. When you trade
currencies, they literally work against each other.
Different currencies pay different interest rates. The
interest rate differential doesn't usually affect trade
considerations unless you plan on holding a position with a
large differential for a long period of time. This is one
of the main driving forces behind foreign exchange trends.
You can have both a positive and a negative interest rate
differential, so it may work for or against you when you
make a trade. It is inherently attractive to be a buyer of
a currency that pays a high interest rate while being short
a currency that has a low interest rate. Fortunately, there
are no daily limits on foreign exchange trading and no
restrictions on trading hours other than the weekend. This
means that there will nearly always be an opportunity to
react to moves in the main currency markets and a low risk
of getting caught without the opportunity of getting out.
A forex trading method with a high winning percentage is
rewarding psychologically, keeps your morale high and is
enjoyable to trade. A string of profits will build your
confidence. Losses have to be kept small and wins should be
larger than losses. You can make big money working only a
few hours a day or week on your computer. You can trade
from anywhere in the world where there is an internet
connection.
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Andrew Daigle is the owner, creator and author of many
successful websites including ForexBoost at
http://www.ForexBoost.com and
http://forexboost1.blogspot.com , Free Forex Training
Resource for the Novice and Advanced Forex trader.
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