If You Read About Investing, You Ve Seen The Word Forex Pop Up

Category: Finance, Currency Trading.

If you read about investing, you ve seen the word forex pop up.

As recently as ten years ago, currency trading had high barriers to entry, so only large banking and institutional firms had access to the tools and systems required to play in the forex game. But because forex doesn t get much publicity in the major publications and websites, many investors don t know that forex is just short for" foreign exchange. " So trading the forex market is simply trading foreign currencies. Recently, technology has developed, however to the point that any individual investor can hop right in and trade with one of the many online platforms. Those four are the Euro vs U. When buying and selling in the forex market, you ll see that there are four" currency pairs" that dominate the percentage of trades. The goal when investing in currency is to be holding a currency that appreciates in value in relation to the other currencies. Dollar, US Dollar vs Japanese Yen, US Dollar vs Swiss Franc, and US Dollar vs British Pound.

To use an overly simplistic example, if you bought 50 British Pounds for 100 US Dollars, held the Pounds for 1 week, and in that period the value of Pounds increased in relation to US Dollars, you could then convert those Pounds back into dollars for, say, $12 Unlike the domestic stock markets, the forex is open for trades 24 hours a day. Since every country trades on the FX market, and it s open all day, the daily volume is roughly$ 2 trillion, which dwarfs that of the NYSE. Much like the phrase" it s always noon somewhere, " it s always business hours at some region of the globe. Another comparison to make in order to truly realize the magnitude of the forex market is with the currency futures market( which has around 1% of the daily volume) . There is no central body or organization required to act as middleman. One other important distinction to make is that currency trading is not centered on an exchange like the NYSE or NASDAQ.

Trading circulates between major banking centers around the world. But with the advent of the internet came the FX brokers. Until recently, there were strict financial requirements and massive minimum transaction sizes which prevented individual investors from trading. A forex broker is similar to an online stock trading account such as etrade. Because the brokers have thousands of investors placing orders through them, they are able to meet the large minimum transaction size by purchasing in large blocks and distributing currency amongst the purchasing investors. Anybody can open an account and buy and sell in any quantity. Although it is now easy to start trading forex, it is a complicated and complex market.

Before trading forex, do your homework and read as much as you can find before investing your hard earned money. While it offers fantastic opportunity for wealth, it is also very easy to lose your shirt in a hurry.

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