Forex Trading – What Is It?

By Simon Tridull

Forex trading is the largest financial market in the world exceeding $2 Trillion a day and can be an extremely lucrative, yet volatile and risky market. Trading is not only available to large investors but smaller transactions are available to allow traders to take part in trading and profit from various online Trading Systems. The word is derived from a combination of two words, foreign and exchange. The speculative art of Trading is just like investing in other things such as stocks, houses etc apart from it is putting your money into different currencies.

The market is always done in currency pairs with the first currency being the base currency and the second currency being the quote or counter currency. There are actually a lot of different currency pairs, but there are only four main ones that are regularly traded. These are Euro/US Dollar (EUR/USD) and US Dollar/Japanese Yen (USD/JPY), British Pound/US Dollar (GBP/USD) and US Dollar/Swiss Franc (USD/CHF). The whole process is about putting your money into a different currency for a period of time so that you can get the interest for the period of time that you hold the other currency. You will often hear that is traded on a margin. All this actually means is that you purchase a lot or a mini lot i.e. a set amount of a single currency but only actually put a deposit on that purchase. By allowing leveraging through trading on a margin, this allows people from all walks of life to be able to trade on the Market.

However, it is of major importance that you understand what you are doing before you start to trade as you could lose a lot of money in a very short period of time. Although Trading may be difficult to understand at the beginning, there are good profits that can be made. Trading is fun and challenging, and is quickly becoming one of the investing world’s hottest, most rewarding opportunities. Another advantage of trading is of course the fact that it is global and there are not restrictions placed on shorting which means that you can enjoy your profit opportunities no matter what the market condition. trading is simply a world wide trading market running 24 hours from Monday to Friday.

Forex trading is not a gift; it is a skill that can be acquired in the course of study and practice. It is a skill that takes time to learn but once learnt can be VERY rewarding. Before embarking on trying to trade on the marketplace, you will need to take several months researching how to trade. During this time you will need to watch the market and make sure you understand fully what is happening any why. Once you feel comfortable that you can understand what is going on, and then you should go ahead and do some practice trading with one of the many demonstration systems out there, using practice accounts so you will not have to risk any real money until you are ready. A major pointer here is to remember that trading is high risk as well as high gain so you should only use money that you can afford to lose once you try trading for real. If you can only risk a small amount of money to start, then mini trading would be the suggested route. Forex trading is not without its risks and many of these will be learnt during the course of trading. In addition, please note that trading is highly speculative and you do need to understand the risks involved in trading with any form of buy sell signal or signal for the market internet based or other form of trading.

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