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What's Forex? A Quick Guide In to the Realm of Currencies



So let's get started! What's Forex?

Forex is an acronym for Foreign currency. The foreign exchange is a currency market where currencies are traded. It represents the biggest financial market on the planet with daily trading volume exceeding $4 trillion. Just to compare, other real estate markets such as equities at $50 billion daily trading volume, and also the futures market at $30 billion in daily volume you can start to understand how big your pet and more importantly the infinite trading opportunities that lie before you!

The Forex market is really a 24 hour market running from Monday morning in Tokyo to Friday evening in Ny - non-stop action around the world! This differs vastly from the other financial markets (like stock markets and commodities exchanges) which open at the outset of and close after their trading day. They're directly associated with the time zone they are in which makes them more difficult to trade. So for instance, for somebody living in Australia, when they wanted to trade the US stock market they'd have to be up through the night to do so because of the time difference. You'll have no such problems in Forex! You can trade at any time, at your convenience. Obviously, the very best times to trade are once the biggest investing arenas are open - that is the US and European markets - as the biggest players are out to play and liquidity reaches its highest.

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Players that come into this market vary significantly, its probably the only marketplace where you can find traders with $500 accounts trading against big players (and winning!) such as hedge funds, large banks, corporations and governments!

So I get what Forex is, but explain Forex currency trading!

Essentially, Forex currency trading means exchanging once currency with another, for any period of time, for any profit. In this business (yes it's a business) you're basically speculating that, for several reasons, you anticipate that the currency will go up or down in relation to another currency and you're willing to bet some your capital to profit from that idea. For instance, you could expect the Euro to increase from the US Dollar, which means you buy Euro's then sell US Dollars. Once the Euro actually goes up, you can sell the Euro's, buy $ $ $ $ and take your profit.

Fundamental economic news and political situations play an important role in the fluctuation in value of a currency for any given country. I'll be going into a lot more detail relating to this in the Fundamental vs Technical trading article which you will be posting in this series!