Introduction to Forex

Today, well over 1 trillion dollars per day is traded on the currency exchange market. This amounts to roughly one third of the US GDP. This amount absolutely dwarfs what is traded on equity and commodity markets on a daily basis.

So why is changing currency so popular? Why do more people want to trade on the currency exchange market than on markets for commodities and equity? Well, to give a simple answer: many of the people in the market for Foreign exchange are not investors. For instance, some of the largest players in the money exchange market are multi-national corporations, who need to constantly swap contracts, so they can purchase inputs or finished products from producers in other countries. Other
major players in the foreign currency exchange market include federal governments. They will often purchase other currencies to stabilize their own currency in relation to another. For instance, if the US Treasury or the Federal Reserve System were to purchase Euros (and subsequently take them off the currency market), the value of the Euro would increase in relation to the dollar. This would stimulate European demand for American imports while decreasing American demand for European imports.

While the above partly explains why the demand for exchanging money is so great, it does not do so completely. One other reason why the demand for foreign exchange is so great is because it is the most liquid investment vehicle available. While selling stocks and bonds may take a while and may be dependent on market conditions, selling contracts is usually quite easy. In fact, most online brokers allow you to trade with "no slippage," which means that the second you click "sell," you actually sell the currency you're holding at the exact swap ratio listed on the trading platform. This means that you do not need to worry about getting stuck with a currency that is rapidly declining in value. Rather, you can sell quickly and get out at any moment.

One last factor that has perpetuated the growth of the money exchanging market is international bank holdings. Not only do banks often exchange currencies for their business account holders when they make transactions, but they also sometimes offer to hold deposits in banks overseas or in different currencies. This can prove to be quite advantageous for depositors. For instance, if the value of the dollar is climbing rapidly in relation to the yen, Japanese banks may start to put some deposits into dollars. After the value of the dollar has appreciated significantly, depositors will be able to exchange the dollars for yen, getting back more yen per dollar than was initially deposited.

As you have read, money exchange is a massive market, which influences the decisions of governments, businesses, banks, and individuals. Not only does Forex allow each of these players to make an extremely liquid investment, but it also makes foreign transactions easier.



Source by Mark Crisp

Learning Forex Strategies – An Introduction to Forex Trading

Most people are aware of the fact that it is possible to earn from home with forex trading but most of them fail to make the plunge. Therefore, it is a good idea to provide them with an introduction to forex trading. Fx is a buying and selling business though there are no commodities are involved. You must understand that treaties in the world fluctuate in value and they constantly go in circles with ups and downs. Forex trading is all about buying currencies when they are down and selling them when they are up.

Forex trading is easier said than done for the simple reason that when you buy contracts you need to make sure that they will go up in price in the short term. Also, you need to buy when the price has no more room to go down because if it goes down further it might take a long time to recover. In case you hold your money until that happens, you will lose interest for the money you hold. With all these requirements it is not easy to do online trading. Therefore, you need to learn and practice it with dedication to make money with.

When it comes to trade online it has its own terminology which is the language the traders speak. In order to understand forex trading you need to know about spreads, pips, leverage, orders, quotes and many other terms that are used in this trade. Once you learn these basics you could go online and take part in various forums in order to learn the basics of fx.

In case you feel that you are able to understand what online trading is it is a good idea to go to any website and use a demo account in order to get your first experience on how currency trading works. Since you never spend any money, you have the option to use your own methods to do the trading. When you do, you will understand that you need to develop you own strategies to make profits.

Learning online strategies is the final phase of your introduction to forex trading. Once you learn them you could use them to good effect. In the meantime you could try using automated trading software also. Finally, you could start forex trading using real money. With experience you will become a good trader who makes money out of trading.



Source by Nivia Devidson