What the FOREX is?
Author:
Iulian Gabriel Ilin
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In the international currency exchange market, the currency trader’s goal is to earn as much profit as possible as a result of purchasing and selling foreign currencies. Currency exchange rates fluctuate perpetually based on continuous supply and demand by traders in addition to other more significant factors discussed below.
Currency traders derive substantial gains by taking advantage of considerable fluctuations in currency price while using the well-known “buy low - sell high” principle. In comparison to all other sectors of the financial world, foreign currency exchange is quite unique in that it is highly sensitive to myriad factors, open access to many classes of investors, high liquidity, and 24 hour access. Such day-long access to foreign exchange allows traders the luxury of dealing after normal hours or even during national holidays in their country of residence. Much as is the case in equity markets, trading currency comes with potential risk and considerably higher potential for ROI. However, in currency trading, as a consequence of the drastic and fluid fluctuations in currency valuation, the potential for risk, as well as return, is exceedingly high. It is essential to become familiar with the factors that affect prices and the levels of risk involved.
When beginning to enter the foreign currency exchange arena, it is crucial to prepare, much like a saavy investor spends hours analyzing a stock’s fundamentals or technical data before investing in equity. One way to achieve such preparation is to first look at some key factors and recent newsworthy events related to the currencies that one wishes to deal with. In addition, it is also important to use a demo account with “virtual” money in order to get one’s feet wet and get a sense for how FOREX really works. Why would you want to learn and experiment with your own capital when you can make mistakes and get some experience by using imaginary capital. You’ll minimize your material damage considerably by getting some practical experience in this fashion. If you do your homework, you’ll notice that there are many firms out there offering demo accounts on a trial basis to help you get a taste for what it is like to trade foreign currency. Such demo accounts and proprietary software are usually available for free.
We wish you the best of luck in your trading endeavors.
Foreign Exchange (Forex: Foreign Exchange) Forex? What is it, anyway?The marketThe currency trading (FOREX) market is the biggest and fastest growing market on earth. Its daily turnover is more than 2.5 trillion dollars. The participants in this market are banks, organizations, investors and private individuals, just like you.
The goods (merchandise)Markets are places to trade goods, and the same goes with FOREX. The Forex goods are the currencies of various countries. You buy Euro, paying with US dollars, or you sell Japanese Yens for Canadian dollars. That’s all.
How does one profit in Forex?Obviously, buy cheap and sell for more! The profit potential comes from the fluctuations (changes) in the currency exchange market.
The nice thing about the FOREX market, is that regular daily fluctuations, say - around 1%, are multiplied by 100!
How risky is Forex trading?You cannot lose more than your “margin” (your initial investment)! You may profit unlimited amounts, but you never lose more than what you initially risked. However, risk only what you can afford and is not vital for your well-being.
How do I monitor my Forex trading?Online, from anywhere, anytime. You have full control to monitor status, check scenarios, change some terms in the deal, or close it.
Foreign Exchange MarketAn informal network of trading relationships between the world’s major banks and other market participants, sometimes referred to as the ‘interbank’ market. The foreign exchange market has no central clearinghouse or exchange, and is considered an over-the-counter (OTC) market.
Spot MarketMarket for buying and selling currencies usually for settlement within two business days (the value date). USD/CAD = 1 day.
RolloverThe process whereby the settlement of a transaction is rolled forward to the next value date with the cost of this process being based on the interest rate differential between two currencies. Rollover typically occurs at 5PM EST/10PM GMT. For example, if you open a position on Monday, the settlement date will be Wednesday, however, if you hold this position past rollover cutoff on Monday, the new value date will be Thursday. Most brokers will automatically roll over your open positions, allowing you to hold a position for an indefinite period of time. Depending on your broker’s rollover policy, if you are holding a currency with a higher rate of interest in the pair, you will earn credits, however if you are holding a currency with a lower rate of interest in the pair, you will pay it. Current central bank interest rates.
Exchange RateThe value of one currency expressed in terms of another. For example, if the EUR/USD exchange rate is 1.3200, 1 Euro is worth US$1.3200.
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