Forex Trading Defined

By Author: Wendi Rogers
Total Articles: 90
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Forex trading refers to buying and selling of currencies of different countries, simultaneously or exchanging currencies of one country with that of another. The forex market is the oldest and the biggest in the world. Active 24x7x365 days per year, it is the market featuring the largest liquidity. There is no exchange center like we have for the stock market. This trade never halts and continues day in and out across the globe.

The Dynamic Currency Market

The currencies of the world hardly have a fixed rate of exchange. They are forever fluctuating. The currencies are traded in pairs like Dollar/Yen, Euro/dollar, and others. Most of the investments deal with US dollar against Japanese yen, US dollar against Swiss franc, Euro against US dollar, British pound against US dollar, and others. These are major currency pairs and also referred to as "blue chips" of the foreign exchange market. The fundamental principle of buying while low and selling while high provides profit in forex trading. There are no dividends on the currencies.

If you predict that the value of one currency would overshadow another, you ...
... can exchange the other one for the first currency and wait for the reward. If the market follows your prediction, you're lucky and can reverse the transaction by exchanging back the currencies and grabbing profits.

The daily turnover of the forex market is around $1.2 trillion! The prices here need no dramatic shift to fluctuate. This is unlike the stock market where fluctuations occur due to noticeable gaps. Besides, you have no problem entering or exiting this market.

The Role Of FX Companies

In forex trading, the transactions are done by FX brokerage companies that are also referred to as major bank dealers. Earlier, small traders had no chance to get involved in this inter-bank trading because of stringent financial requirements and minimum amount of transaction. Only big traders, banks, and large currency dealers played the game of currencies. Their strength was the ultimate access to FX market, which featured a large number of primary exchange rates in world currencies, spectacular liquidity, and a strong pattern.

Today, the scenario is different. Small traders, too, have a chance to buy small units. This has happened mainly because of the split up of big inter-bank units by brokers. Thanks to online firms offering FX rates, seminars on currency trading, and guidelines to beginners on this market, it is possible for first-time traders as well as small speculators to achieve big in this market.

Now, you need not be a big company or a stalwart in trading to gain access to this market. Almost everybody can enter forex trading at the same exchange rates and price fluctuations, which used to be the privilege of major brokers. Market makers closely examine the exchange rates to make profit on the difference of currency rates on which they were bought and sold.

The currency market is like a restless ocean where you can never know when a shark strikes you or a huge wave washes you out. However, this is also the same place where you can make a cool $100,000 out of a mere $1,000 investment by smart forex trading!
Forex trading is now available to almost everyone. It's so easy to get going that people might overlook some important areas. Visit my favorite forex provider to find out all of the steps you should take before getting into the Forex Market.