What is the Forex Market?So what exactly is this Forex market that you've heard so much about on late night infomercials and banner ads across the Internet? It happens to be the biggest financial market in the world today. Within the Forex market, $4 trillion exchanges hands on a daily basis. That's trillion with a "t" in case you thought it was a misprint. That dwarfs the stock market, which only trades a puny $134 billion on a daily basis.
If this market sounds like something you would like to learn more about, this is the place for you. In this section of the site, you can learn about the basics of the foreign exchange markets and what it takes to be a successful Forex trader. You can also learn about some of the many benefits of currency trading. When reading this section of the site, just keep in mind that the currency market is definitely not for everyone. While it does have immense potential for traders who want to make money, some people just don't get it. There's also been a lot of attention paid to Forex scams and Forex frauds , which discourages some from getting involved. That is completely fine. Just check it out and give it the benefit of the doubt before making a judgment.
Who Trades Forex
Many parties are involved in the market. Traders like you, retail brokers, ECN brokers, and the interbank Forex traders all play a role in this market. They all work together to create the largest, most liquid market in the world today.
One of the benefits of getting involved with currency trading is that you can open Forex trades at any time throughout the week. The foreign exchange markets are not held in a single location and are open 24 hours per day, 5 days per week. This is truly the market that never sleeps (except on the weekends). Understanding the Forex market hours for the various foreign currency exchange locations around the world can help you choose the best trading times for your particular strategy. For example, one strategy that you use might work better when the Tokyo foreign exchange market is open or during the Forex UK session than during the India Forex or the New Zealand Forex session session. Everything is done through online trading but they still have trading sessions in locations across the world like London, New York, Tokyo and Sydney.
A quick side note: currency trading in India works a little differently than it does in other countries. If you live in that country, make sure you know the rules.
Depending on where you live, you may also need to understand the Forex tax laws for your region.
Besides trading regular Forex currency pairs, you can also get involved with Forex options trading as well. Options and forward contracts are popular when it comes to managing foreign exchange risk .
Compared to Stocks
While Forex investments hold the same basic principles of buying low and selling high, online foreign exchange trading works a little bit differently than what most investors are used to. With the Forex market, you are actually trading one currency against another in an effort to gain Forex pips . When you trade two currrencies at once, you are dealing with Forex currency pairs. Instead of trying to trade shares of Corporation XYZ, you are trading the Dollar against the Yen or some other combination of currencies. Your hope is that you can take advantage of the fluctuations in exchange rates between the two currencies.
With the Forex exchange , you only have a few currencies to deal with. In the stock market, you have thousands upon thousands of stocks that you could potentially buy. With Forex, you really do not have to be a jack of all trades to be successful. You can pick a few currency pairs that you like and stick with them. When trading currency pairs, it is important that you understand how to read foreign exchange quotes and what foreign exchange spreads are and why they are critical to Forex traders.
Another key difference between the stock market and Forex market is the number of participants. In the stock market, you and the sellers have to do business inside a centralized exchange. In the Forex currency exchange you have many participants including the major banks, electronic brokering services, retail brokers, ECN's and traders.
Although we're a bit biased towards the Forex market (obviously) the stock market definitely still has some merit to investors. Stock options in particular can be intriguing. If you are interested in stock options, the place you want to check out is Stock Options Made Easy.
When you get started in the Forex market, you actually have the ability to trade a demo Forex account which gives you the chance to practice your trading strategies. You can practice scalping, hedging and any other strategy that you might have. You can get one of these accounts for free from any Forex broker in the market and start trading immediately. These accounts also make it possible for you to get a grasp on Forex money management as well. Without money management, you will struggle to make any money.
Trading in the foreign exchange market has immense potential for individual traders. As stated earlier, a lot of money exchanges hands in this particular market. If you could only get an unbelievably small portion of that, you would be extremely wealthy. When trading in the market, you will get the opportunity to use large amounts of leverage. Some brokers offer leverage of up to 500:1. This allows you to control extremely large amounts of capital on each trade. Other financial markets may only allow you to use 1:1 leverage if any at all. This has the capability of helping you bring in a lot of money in a short period of time.
While it does have amazing potential, you have to learn how to be successful in the foreign currency exchange before the money comes rolling into your pocket. You have to learn about things like money management , trading systems and trading discipline before you can realistically expect to win consistently.
The market also carries with it a large amount of foreign exchange risk . If you're going to play, you have to be willing to lose. You should not ever get started unless you have money that you could do without. Until then, you can practice trading on a demo account. If you're not sure what the market is going to do, you can always check out the latest Forex analysis . This will help you see what the experts think about the market at any given time.
When you're learning the basics of the market, sometimes it helps to be able to interact with other like-minded individuals. I mean, let's face it...most of your friends or family probably have no idea what the foreign exchange market is or why you're interested in it.
Because of this, you might want to check out some of the various places online where you can chat with other people who are interested in the market.