The FOREX market- introduction for the fresh trader [Pt.1]
The Foreign Exchange Market literally grew out of the international financial market because of different countries' need of buying and selling each other's currency. This trading system is identical to the stock market in many ways. As in the stock market, people who trade in the forex influence the currency ratio (aka "price") according to the code of supply and demand. The forex is the most liquid and exceptionally financial market with gigantic sums (up to 1.5 trillion) of US dollars shifting in value per day. Due to its mammoth liquidity and its swift pace, it is improbable for neither an individual trader nor financial foundation to manipulate the market or affect the price of any currency for their own profit.
The forex market has an assortment of world centers: London, Paris, Frankfurt, New York, Sydney, Z?rich, Tokyo, Singapore and Hong Kong create a circle of 24 hours open market- across different time zones. Therefore there is always a demand and there is always a supply in any given time. Nowadays, especially with the Internet, a trader can seal a deal in a matter of seconds.
Unlike the stock market which is familiar with long-term investments, the forex is known for its possibilities to gain huge profits in an issue of minutes or a small movement change in a certain currency. There are long-term investors as well, mainly hedge investors. For every way of trading, there is a selection of tactics that may apply and systems to choose from, each way got its own compensations as well as shortcomings.
About the Author
Andrew Keynes is a long time FOREX trader. A husband and father of two, Keynes has proven himself and built his reputation as an expert to the Foreign Exchange market over many years.
He has successfully served as financial advisor to several large hedge funds and groups and is nowadays busy pushing his latest effort, www.forexblogs.net.
Should You Invest In The Forex Market Or In Stocks?
Stocks, or shares as they are more commonly called in the United Kingdom, have been the backbone of many investments for hundreds of years and often form the underlying investment in many traditional forms of savings plan, such as life insurance policies set up not only to provide life cover but also to produce a return on maturity.
Companies typically issue stock when they wish to raise capital and purchase of this stock represents a partial ownership in the company. In return many companies will often issue a share of their profits to stockholders in the form of an annual, or sometimes biannual, dividend payment. In addition, if the company does well the value of its stock will increase and stockholders may then profit from the sale of their stock.
Stocks are traded on a number of stock exchanges through brokers including the London Stock Exchange (LSE), the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ). There are also a number of other major stock exchanges around the world. In most cases stocks will be listed with one particular exchange, but larger international companies may well list their stock on several different exchanges.
Traditionally stocks have been seen as long-term investments and purchasers have normally been looking at buying stock to hold for periods of five years or more. Many stocks, often referred to as "blue chip" stocks, are issued by companies with long and proven track records and traditionally form the core of many investment portfolios.
Short-term trading in stocks is a relatively new phenomenon and has been made possible to a large extent with the arrival of Internet trading. Here day traders try to take advantage of often large daily movements in the market by buying and selling many times in a single trading period. This is however a fairly risky business and any profits made can quickly be reduced by broker commissions which are charged on every transaction.
The Forex, or foreign exchange, market is quite different from the stock exchange. The Forex market is principally a short-term market with most traders entering and exiting deals within a single day and, sometimes, within as little as a few minutes. Forex trades are also "commission free" which means that a large number of trades can be made without running up a large brokerage bill. In the Forex market brokers earn their money by setting a spread in the price for buying and selling, known as the asking and selling prices.
The Forex handles transactions worth $1.9 trillion every day is the largest financial market in the world. To really appreciate the size of this market you have only to compare it to all of the American stock exchanges which, combined, handle daily transactions worth about $100 billion. The huge volume Forex trading also means that it is one of the most liquid markets in the world and that there is almost always a buyer and seller for any currency as the world economy is based very largely on the movement of goods from one country to another. The stock market by contrast is far less liquid and many stockholders choose to hold their investments for considerable periods of time.
Unlike the stock markets, The Forex market has no central location and trading markets are located throughout the world. Also, because of differences in time as we move across time-zones, trades can be made 24 hours a day, 5 days a week. Trading begins in Sydney, Australia on Monday morning (Sunday afternoon New York time) and continues non-stop until Friday afternoon New York time.
Stock exchanges offer far more limited trading hours and, while it is theoretically possible to trade on stock markets in Japan while the American markets are closed, many stocks are only listed on specific exchanges and cannot be traded elsewhere. Most stock exchanges are open from Monday through Friday, typically for a period of seven hours each day.
The Forex market tends to be more predictable than stock markets and often follows fairly well established trends. It also allows traders to take advantage of leverage which is typically as high as 100 to 1 (against 2 to 1 found on most stock markets) which means that investors can participate in Forex trading with a minimal investment. Indeed many brokerages today offer mini Forex account which can be opened with as little as $250.
Forex Trading: Good Opportunity Or Scam?
Until recently, the forex market or foregn currency exchange market wasn't for the average trader or individual speculator. With the large minimum transaction sizes and often-stringent financial requirements, banks, hedge funds, major currency dealers and the occasional high net-worth individual speculator were the principal participants. These large traders were able to take advantage of the many benefits offered by the forex market vs. other markets, including the fantastic liquidity and strong trending nature of the world's primary currency exchange rates.
Fortunately, thanks to new legislation written in the late 1990?s, forex brokerages have opened up to the general public and offer trading opportunities for anyone who has an interest in trading currencies for profit. In fact, many brokers allow traders to open and trade currency with as little as $250 dollars in an account.
Regrettably, all of these new currency trading opportunities have created a lot of hype around the forex. Some of this hype includes magic trading formulas, ?easy? indicators and expert trend predictors. There are now countless currency brokerages enticing potential traders to open accounts and start trading today. Many people have started to get the feeling that trading currency is more of a scam then anything else. We strongly disagree with this notion and are certain that the forex market has much to offer investors. However, before your take you paycheck and head down to the nearest brokerage to open your forex account, may we make some important suggestions before you enter the currency market?
First, there are thousands of websites with information, terminology, trading strategies and more. We recommend researching several of them as you begin to explore the basics of what the forex is. Brokers often will offer information about the forex, but realize that they are also trying to get you to open an account. Aside from brokerage sites, there are several informational sites and a few forex education companies on the market that offer good information without the pressure of signing up for a ?live? trading account.
Second, read some books. Most of the professional forex traders operate using a combination of Japanese candlestick charts and other complex indicators to determine the direction of a particular currency pair. Find books about technical analysis trading, candlestick charts and other methodological indicators. Remember that when you are buying currency it is like buying a stock in a nation or country. Learn about different countries economic announcements, interest reports, and job indicators. These are highly relevant factors that help indicate a currencies direction.
At this point, it may be time for you to open a demo account with the broker of your choice. This will help you get familiar with trading platforms and basic charts. Practice making some ?demo trades?. Even after doing some basic homework you will find that you fell like you areflying by the seat of your pants? during your trades. At this humbling point in your new forex trading career you realize its time to take a forex training course.
There are many forex training courses on the market today. They come in many forms including seminars, home study courses, interactive online courses, and class room education. Fxcenter.com, one such forex training course has found that the best education courses use all of these methods in their training regime. They feel that a program should include a minimum of 20 hours of home study to teach the basic principles of forex trading. Next a student would need to observe the market in action, without necessarily making trades. To do this, an interactive online class is necessary to help you tie in all the information and begin to apply it to live market conditions. Onsite classes then further reiterate the fundamentals of trading forex and help the student discover a trading strategy that fits his or her personality, financial status and risk tolerance. Finally, working with a highly skilled forex mentor, again during live market sessions, is critical to help the student understand the psychological part of trading. These mentors would also help students create an advanced trading system and analyze the market minute by minute.
Most successful traders have spent years developing good trading habits and learning the hard way how to take advantage of currency volatility. We strongly recommend you follow these steps as you begin to investigate investment opportunities in the forex market.
About the Author:
For more information on forex training and how you can get ahead into todays market please visit our site. Get some forex education and take your skills to the next level!
What Is Online FOREX Currency Trading?
For the past 10 years, currency trading has grown dramatically. This has resulted in many companies setting up online currency trading operations. Forex, also known as the "Foreign Exchange" is used by all these companies. They offer all their customers a secure and safe place to conduct online currency trades.
When you wish to trade in the Forex market, you will have numerous companies to select from. All of them will supply you with various resources and tools. Almost all of them will provide you with real time market prices. They receive this information from the multi-sources inter-bank prices feed of the Forex. As a result, you will be able to make better trading decisions from the timely and accurate information. Unlike other markets, you will not find any re-quotes or time-delays which are frequently apparent in other markets. With these timely information on market prices, you can then use the Internet to trade directly.
Your trades are executed almost immediately when you participate in the Forex online currency trading. In fact, the currency trades are done in a fraction of a second on average. The transactions are executed at a very high speed.
When you are buying or selling in the Forex market, you?ll have 15 unique currencies available for you to trade in. This will provide you with many different options which you can subsequently formulate for many different potential strategies. Since the Forex is accessible to the public since 1995, we are looking at a relatively young market. But as it ages, it is very probable that the number of available currencies will continue to grow. With the available options expanding, you can also expect the number of people trading in this market to expand making it easier for you to execute a trade.
You should make sure that you are well equipped if you want to trade in Forex. It is important to deal with companies that will provide you with the right tools and resources. You should find Forex companies with the ability to provide you with timely news and the latest updates on the currency situation so that you will be properly informed and be aware of what is happening currently. You must research adequately into what online currency trading is all about especially if you are new to online currency trading. Once you are equipped with the right knowledge, you can then enter into the world of online currency trading with confidence, knowing that the Forex market is your number one option to earning a good profit on your investment.
