Even though it has been a badly kept secret, more and more investors are turning to the totally electronic world of Forex trading to gain numerous advantages and benefits.
But, still, whenever something seems new to us or just becoming a part of social conversation or news articles, we must overcome misconceptions and the mind should be open to start with the right information.
Throughout this article I am going to give you some not too detailed information about the Forex market (FX).
As a successful trader said, trading on Forex is like picking up money from the floor. Not trading on Forex is like leaving the money there for another person to pick it up. Others say that trading with currencies is like having an ATM on your own computer.
Here's an explanation of what Forex is and how traders enjoy FOREX and profit:
The Forex market, also known as Forex, or FX, is the spot market for currency as it has the highest volume.
But, do not confuse FX with the futures exchange, where you buy contracts established between two parties to buy or sell a certain amount of a currency at a price set at a future date.
Investing in Forex is less risky than investing in futures contracts. Investing in futures can lead to big losses.
So, you are probably asking where is ... or ... how to access the foreign exchange market?
The answer is: The Forex market is not centralized in any stock market, as in the stock and futures markets. The forex market is considered an over-the-counter market (OTC) or 'Interbank' market, because the market is executed electronically, within a network of banks, continuously over a 24-hour period.
If this is the first time you have heard of the fully electronic market, then this may sound intriguing.
Here we talk about what is traded in the Forex Market (Forex):
Essentially, just like the big banks that use the FX market to hedge against the fluctuations of exchange rates between different currencies, both an FX trader is doing the exchange of one currency for another at the same time. So, at present, they are operating electronically with a currency pair and the exchange rate as a currency price is set.
In other words, the exchange rate between two currencies allows the ratio between the value of one and the other.
If the EUR / USD exchange rate is 1.2850 it means that we must deliver $ 1.2850 to get one euro. The first currency is the base currency (in this example EUR) and the second is the currency quoted (/ USD).
The Forex is able to move around 1.5 trillion dollars a day - it is 30 times bigger than the combined volume of all US stock markets. This means that each of the 1,498,574 specialized traders could take 1 million Of dollars from the forex market every day and Forex would still have more money than the New York Stock Exchange every day.
Forex plays a vital role in the world economy and there will always be a tremendous need for currency exchange. International trade increases as technology and communication increase. While there is an international trade, there will be a foreign exchange market. The foreign exchange market has to exist so that a country like Japan can sell products in the United States and be able to receive Japanese yen in exchange for US dollars.
Many traders who use the right trading techniques / tactics that allow them to benefit immensely can make a lot of money in Forex. About 5% of daily turnover is from banks, companies and governments that buy or sell goods and services in a foreign country or should convert profits made into foreign currencies in their local currency. The other 95% are trading for their own benefit, or speculation.