The Basics of Forex Trading

By: Groshan Fabiola

Foreign exchange, or FOREX, is the term used to refer to trading currencies. The trades on the FOREX market amount over $1.5 trillion daily, making it the world's largest market. Just to get some idea of the amount of money that FOREX trading involves, think of it as being one hundred times bigger than the amount traded daily on the New York Stock Exchange. The currency conversion needs of companies and governments represent a small share of the market, which is the reason why FOREX trading is thought of as speculative. The difference between FOREX trading and stock market trading is that, with the former, it is not the central exchange but the 'interbank' that's controlling the market. The two counterparts interested in making a trade do so directly, either over the phone or by means of worldwide electronic networks. The main centers for FOREX trading are New York, London, Sydney, Frankfurt, and Tokyo, making the FOREX market a twenty-four-hour market.

FOREX trading actually refers to buying one currency and selling another one simultaneously. The currency combination is extremely varied, and is referred to as "cross". The most common combinations are called "majors".

The spot market is the most important FOREX market, given its volume, which is the largest. The name of the market comes from the way that trades are settled, i.e. "on the spot".

If you're wondering why so many people choose online FOREX trading, you should know that it comes with a lot of advantages, such as 24-hour trading, the lack of commissions, superior liquidity, a considerable potential for profit in falling markets, 100:1 leverage, etc.

First of all, probably the most notable advantage of FOREX trading is the opportunity to trade currencies twenty-four hours a day, within the interval Sunday 8 p.m. GMT - Friday 10 p.m. GMT. What does this mean? It means that considerable profits can be made from instant reactions to markets all over the world being affected by all sorts of events.

Secondly, investors consider FOREX trading very attractive given the fact that currencies are often traded with no commissions. This feature is extremely appealing to those who want to deal on the FOREX market frequently.

Furthermore, FOREX trading comes with superior liquidity, especially for major currencies, which ensures price stability and small differences between the price you sell at and the price you buy at.

Moreover, trading opportunities occur quite often on the FOREX market, based on how the relations among currencies evolve and on the constant movement of the market. This means that the weakening or strengthening of a currency creates considerable profit potential.

Online FOREX trading is possible from your mobile phone or your personal computer, but if you plan on trading online, make sure you have the appropriate software system, which allows both collection of information on market prices and quick and easy trading. You can use either web -based software or client-based software for your online FOREX trading, either of which must give you the ability to buy and sell quickly on the market, as well as provide real time quotes.

For more resources about online forex trading or even about forex trading please review http://www.forextradingseminar.com

Foreign Exchange
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