Category: 
March 2, 2009
As you might know, the foreign exchange market is the largest financial market in the world. There are over $1.2 trillion changing hands every single day. Compare that to the $25 billion a day trading volume at the New York Stock Exchange. In fact, it is three times larger than all of the US Equity and Treasury markets combined together.
The popularity of foreign exchange market has accelerated rapidly in recent years as the prospect of 24 hour, high leverage, very liquid trading, has caught the interest of many traders. Before coming the internet age, previously only large corporations, hedge funds, large commodity trading advisors, and other institutional investors which can access this market and do forex trading. However, with the ascendancy of online/internet trading, many firms have opened up to the individual traders, providing leveraged trading as well as fully featured execution platforms, charts, and real time news.
What is traded on the foreign exchange market? The answer is simple: money. Forex trading is where the currency of one nation is traded for that of another. Therefore, forex trading is always traded in pairs. Te most commonly traded currency pairs are traded against the US Dollar (USD). The major currency pairs are the Euro Dollar (EUR/USD), the British Pound (GBP/USD), the Japanesse Yen (USD/JPY), and Swiss Franc (USD/CHF).
As mentioned before, because there is not a central exchange for the forex market, these pairs and their crosses are traded over the telephone, facsimile, and internet, through a global network of banks, multinational corporations, importers and exporters, brokers, institutional investors, as well as individual traders. Now, almost anyone with a computer and an internet connection can trade currencies just like the world’s largest banks do. There are now over 6 million trading accounts worldwide up from only 1.7 million in 1997.
Unlike the US currency futures markets, which have fixed daily trading hours, the forex market is a seamless, 24 hour market. At 2 p.m. ET each Sunday, trading begins as markets open for the week in Wellington, New Zealand, followed by Sydney and singapore. At 7 p.m. ET the Tokyo market opens, followed by London at 2 a.m. and New York at 8 a.m. This overlapping movement of currency trading among market centers allows traders to react to news immediately, and also provides the added flexibility of determining their trading schedules. If important news occurs while the US currency futures markets are closed, the next day’s opening could be a wild ride.
Many currency brokers (dealers) do not charge outright commision fees to individual traders. Instead, they profit from the bid-ask spread they set. As a result, many currency firms promote their low spreads rather than their low commission rates. Whether this is a good deal or not depends on the size of the spread in a given currency.
In addition to the market’s trading opportunities, foreign exchange can be a solid diversification component in your financial portfolio. Most diversification strategies involve a combination of sector allocation, foreign and domestic equities, and fixed income.
Some participants have branched out into precious metals and/or energy products; however, few traders consider expanding into forex. Why? The reason may be in the simple fact that in the US, investors tend to be underexposed to foreign exchange. Unfamiliarity typically breeds misconceptions, and foreign exchange in the US is no exception.
Nofie Iman
http://www.articlesbase.com/finance-articles/introduction-to-the-forex-trading-57756.html
Horaayy..there are 8 comment(s) for me so far ;)
Currency Trading: is it a viable long term way to make money from home?
I went to an introduction to FOREX (foreign exchange) class recently and they were telling us how with a good education in FOREX you can consistently make money, and good money too, since you are trading 50 or 100 times what you have in your trading account. The complete course is $2000 and they were pushy for us to take the class so I didn't feel so confident about it, but i read up on the subject a bit and did a trial trade for about 30 days, I was up a lot at one point (about $8000) but in the end of the month i pretty muich broke even. WIth more knowledge and a proper education on the subject can it be a long term way of makin money?
DEAR ALL, thanks for your responses, overall you seem to think currency trading is high risk and not really a viable way of making money from home. I should have mentioned in my question that if i were to do it, i would want to rely more on technical analysis and all the ratios and different theorems etc. I would also be making trades that are from about 30 minutes to at most one day. Does this change anyones opinion on the subject?
yes it is but if your ready to risk some money
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this will help you-free useful articles and tips on almost any topic-http://www.free-articles.blogspot.com
Forex trading is really a gamble. Theres so many factors to consider when trading in currency…eg: political conditions of a country are a major factor in determining the strength of a currency.
Unfortunately too many people are just trying to make a quick buck with Forex trading. You must remember that world markets are very volatile at this moment in time with regards to the N.Korean nuclear situation. Do you understand that if you were reading an online news bulletin and the headline read "North Korean nuclear situation", it is far less alarming than "North Korean Nuclear Crisis"…stuff like this could determine Forex changes.
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The Forex market is full of scammers and people who sell questionable products than make them rich and not you. I would advise against Forex trading. You are likely to lose your money. Forex is useful to companies that make money in one country and need to exchange it for money in another country, but most individuals who trade Forex lose money. Read the links:
These trial trade programs do not always properly simulate the market. I would not trust them.
References :
http://www.quatloos.com/FOREX.php
http://en.wikipedia.org/wiki/Forex_scams
I am interested in currency trading, as well. I took an online selfpaced course at a similar cost to yours. I have been day trading only and recently invested in companies located in Brazilian and Isreal. I sold Tefron stock 4-5 weeks ago when I heard news of the Isreal-Palestinian ceasefire. Internaitional economics and politics play an enormous role in currency trades. I sold ITU when I read of corruption in the Brazilian government banking system. However, many analysts are recommending Brazil, Canada, and Australia are good investments. I'd like to hear directly from someone who is making money in currency trading and exactly how it works -step by step.
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I've only been trading the FOREX a few months, and have been doing rather well. I've traded stocks, stock index futures, and options for about 15 years, but got tired of the meaningless volatility with no direction.
The Forex is much simpler than the stock market, and easier to track. There are only six major currency pairs: Euro, British Pound, Swissy, Australian Dollar, Canadian Dollar, and the Yen. With the six major currencies, you will never have liquidity problems, and the spreads are good to reasonable (Currencies are always traded in pairs - EUR/USD, USD/CAD, etc.). And liquidity, well, the stock market trades several hundred million dollars a day, but the Forex trades several trillion dollars a day. Some invividual or institution with a few billion dollars is not going to come in and push this market.
You can certainly trade the Chinese Yuan against the Algerian dinar, but the spread is going to be huge, the currency manipulated, and it might take a long time to move. And the liquidity will be horrible, so you can't use market orders and you won't get your price.
Like most of you, I thought you had to know a lot about the fundamentals of each of the foreign countries, and there are so many countries. But I've just reduced this list down to six majors, and the activities of these six are well known. Like the U.S., they each publish a CPI, and GDP, and Unemployment Rates, and are regularly updating the markets on the biggest influence: interest rates. I've always prided myself as a pure Technical Analyst. Fundamentals are for geeks and goobers; only price matters. But if you're going to trade the Forex, you better pay attention to these reports.
The currencies trend better than any other investment vehicle, and much better than the constant whipsaws in the stock market., so many systems work here that will not work elsewhere. If you can trade the stock market, you can trade the Forex.
With any leveraged position, you must use stops. Good money management is essential here. The gamblers will blow out twice as fast here. More leverage is always more risky, but you do not have to use maximum leverage. You can trade one contract with only $1,000 in a standard account for maximum leverage, or you can trade one contract for every $10,000 you have in the account, or one for every $100,00 you have in the account, and do away with the leverage altogether.
I got so frustrated with the stock market going a different direction almost every day, until you anticipated it, then it changed. It was turning us all into Day Traders. With the Forex, the trend really is your friend.
Like any trading occupation, it requires good data and good charting and analysis software, and you need a good news source on Forex. The only platform that offers all of these, that I'm aware of, is called PremiereTrade. They also offer good training and instruction and message boards that works well for seeing it in action and getting your questions answered.
Check it out.
References :
http://www.premieretradeai.com/index.php
Other Forex sites:
http://www.babypips.com/forex-school/market-hours.html
http://www.forextv.com/FT/Video.jsp?channel=41
http://www.forexnews.com/
http://www.forexcurrencytradingarticles.com/
useful e books:
http://www.rapidforex.com/
http://www.traderssecretcode.com...
http://www.1forextrading.com/
Another approach might be to trade the new ETFs which track foreign currencies. Symbols are FXA, FXB, FXC, FXF, FXS, FXM.
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Yes.
If you have less than $1,000,000.00 USD I suggest you to stay away from FOREX.
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