Intro of Currency Exchange (FOREX) Trading

There are numerous reasons to get involved in FOREX trading – high leverage rates, liquidity of traders capital, truly 24 hours trading environment, convenience of trading online, and the list goes on and on. FOREX trading is one of the latest hypes in the trading world. With more than trillions of average daily turnover, FOREX market stands as the largest trading market. Seven of the world currencies, United States dollars, Australian Dollars, Japanese Yens, British Pounds, Swiss Francs, Canadian Dollars, and the Euro Dollars, are massively traded everyday worldwide. It is simply a world market as there are no centralize trade location available for FOREX traders. Everyday FOREX trade begins in Sydney, and moves around the globe to Tokyo, London, and then New York. Unlike any other financial market, investors can respond to money-value fluctuations caused by economic, social and political events at the time they occur – day or night.

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There are a few reasons why you should learn about FOREX trading, these includes the great leverage rates available in FOREX market, commissions free trading, instant and convenient online trade, and most of all, you can make money regardless to the bull/bear market condition.

For the new comers, FOREX means foreign exchange, or more details, foreign currency exchange. It involves buying and selling currencies concurrently FXORO . Every time a FOREX trader makes a deal, he or she spend different country currency to buy in the other country currency. The trade might looks funny to you at first as FOREX traders are both buying and selling money in the same time.

For the beginners, reading FOREX quotes might be confusing. Some common quotes that you might be seeing are like: USD/JPY 110.2, EUR/USD 1.2385/1.2390, and GBP/USD 1.7360/65. Now these figures might looks complicated but the concept is relatively simple. Currency quoted in pairs simply means the relative value compare to the other. In our given example, USD/JPY 110.2 means a dollar of United States Dollar is equal to 109.2 Japanese Yen. USD in our case is known as the base currency; while Japanese Yen here is the counter currency.

Banks and currency dealers are the major traders in the FOREX market. Large international banks such as HSBC, Barclays, J. P. Morgan Chase, and Deutsche Bank are those who are actively trade in currency exchange. According to Bank for International Settlements (BIS) market surveys, more than half of the foreign exchange transactions are done between financial organizations–either they are strictly between banks, or it involves banks and other non-banking financial institutions.

FOREX trading involves a lot of risks. Thus, analytical approach is always necessary to manage and minimize such risks. Similar to any other investments, FOREX traders apply two kinds of approaches to manage their risk: the fundamental, and the technical analysis.

Fundamental analysis basically means studies of surrounding events that affect the market trends. For example FOREX market, fundamental traders will consider events and situations that will affect the value of a country currency value. These factors include the local bank policies, political states, country growth rates, natural disasters, market speculator’s mood, terrorism attacks, and wars.

Instead of reviewing on the fundamental issues, traders from technical side define market movement according to data purely generated from the market. The term ‘Technical’ is applied in all trading fields, from commodity stocks exchange to option trading, from FOREX to futures.

A pure technician does not care much about fundamental issues, as they always believe the number has it all. The future does not equal with the past. There are a lot of unexpected variables that technical analysis does not reflect on: change of country leaders, change of government, natural disasters, change of bank policies, investor’s mood, war– all these factors affect currency value directly and might not have happened before in the past. A combined of two approaches (fundamental and technical) is always encourage to get the optimum plots on your investment plan.

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