Basics of Foreign Exchange Market
Currency rates of different countries are always change, Forex is the place where people make profit of this change. Foreign exchange doesn't have any central office. The nature of this market is such that traders all over the world participate in it.
On the other hand a separate market for each currency pair exists. Any currency pair has its own price. The currency pairs may act as if they are completely independent on each other, but there is some correlation.
It is obvious that if the economy of some country goes through the crisis the price of its currency also will go down compare to currency prices from other countries. On the other hand the economic indicators of certain country may show even worse situation, that's why the currency price against that country's currency will rise. US dollar would be a good example. It may drop against Euro but rise against the yen.
The big participants who can influence the currency prices are banks and large financial institutions. These financial institutions hire professional Forex traders who trade for them. Those days when only big players could afford to trade currencies are over. Today anybody can get involved in Forex.
High speed Internet connection is recommended for anyone who wants to try to trade in Forex. Dialup Internet connection may not always be the best choice. That can lead to frustration. You can lose money by not being able to react to fast price changes.
The most important thing is to find a right broker for you. Brokers usually offer quite high leverage. A Forex broker can give you 200 leverage for example. That means you can trade a mini lot of 10,000 units by investing only $50. The rest amount is covered by your broker. That's the reason why Forex is so popular; anybody can open a mini account with a couple of hundred dollars.
The liquidity and volatility of the foreign exchange market are very high. Liquidity indicates how simple and quick the investment can be turned back into cash. Forex market deals with cash already therefore it has high liquidity. Another meaning of liquidity is how quickly you can buy and sell. In Forex you can do it anytime unlike with some stock markets.
Market volatility is a measure of how often the price changes. For foreign exchange market the price changes quite often. High volatility and high liquidity makes the foreign exchange market very attractive but at the same time it's a very risky market. Forex presents an opportunity of a very lucrative business. Large profit in relatively short time attracts most people to trade currencies. On the other hand only those who prepared to work hard and acknowledge the risk, they are the ones who make money consistently.
Many traders use technical indicators to trade in Forex. The goal of such technical analysis is to predict the price movement direction in the future.
However the technical analysis is not all what trader needs to know. The worldwide political and financial news also influence the currency prices. The knowledge about these events can be useful even if you are using only technical analysis. You can close your orders before the major news releases. - 23222
On the other hand a separate market for each currency pair exists. Any currency pair has its own price. The currency pairs may act as if they are completely independent on each other, but there is some correlation.
It is obvious that if the economy of some country goes through the crisis the price of its currency also will go down compare to currency prices from other countries. On the other hand the economic indicators of certain country may show even worse situation, that's why the currency price against that country's currency will rise. US dollar would be a good example. It may drop against Euro but rise against the yen.
The big participants who can influence the currency prices are banks and large financial institutions. These financial institutions hire professional Forex traders who trade for them. Those days when only big players could afford to trade currencies are over. Today anybody can get involved in Forex.
High speed Internet connection is recommended for anyone who wants to try to trade in Forex. Dialup Internet connection may not always be the best choice. That can lead to frustration. You can lose money by not being able to react to fast price changes.
The most important thing is to find a right broker for you. Brokers usually offer quite high leverage. A Forex broker can give you 200 leverage for example. That means you can trade a mini lot of 10,000 units by investing only $50. The rest amount is covered by your broker. That's the reason why Forex is so popular; anybody can open a mini account with a couple of hundred dollars.
The liquidity and volatility of the foreign exchange market are very high. Liquidity indicates how simple and quick the investment can be turned back into cash. Forex market deals with cash already therefore it has high liquidity. Another meaning of liquidity is how quickly you can buy and sell. In Forex you can do it anytime unlike with some stock markets.
Market volatility is a measure of how often the price changes. For foreign exchange market the price changes quite often. High volatility and high liquidity makes the foreign exchange market very attractive but at the same time it's a very risky market. Forex presents an opportunity of a very lucrative business. Large profit in relatively short time attracts most people to trade currencies. On the other hand only those who prepared to work hard and acknowledge the risk, they are the ones who make money consistently.
Many traders use technical indicators to trade in Forex. The goal of such technical analysis is to predict the price movement direction in the future.
However the technical analysis is not all what trader needs to know. The worldwide political and financial news also influence the currency prices. The knowledge about these events can be useful even if you are using only technical analysis. You can close your orders before the major news releases. - 23222
About the Author:
Albert Schmidt is a successful trader in Forex market for a few years by now. Learn more how you too can learn to trade currencies at his website about Forex trader e-course.
posted by X - Men @ 3:05 AM
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