Foreign exchange or "forex" currency trading is much, much larger than what goes on each day in all of the world's stock markets combined. While the risks are high, so are the potential profits. The secret to success is in learning how to control the risk.
Foreign exchange trading is also known as “FX” or “forex.” Who is involved in the foreign exchange markets? Some of the leading banks and companies from all over the globe trade in currencies from various countries in order to create a balance where some are going to profit while others are going to be on the losing side of the equation.
The basics of foreign exchange trading are similar to the stock market. Just like stock markets, foreign exchange markets are found in any country but on a much larger scale because they involve people, currencies and trades from all over the world, not only from a particular country.
Currency rates change continually. The value of the dollar on one day could be higher or lower than the next. The currency trading on the FX market necessitates watching value changes closely. This is because of the fact that if you are investing huge amounts of money, you could lose huge amounts of funds. The principal trading exchanges for foreign exchange are in Tokyo, London and New York, even though there are many other places around the globe where FX trading exists.
The most heavily traded currencies are the Australian dollar, the Swiss franc, the British pound sterling, the Japanese yen, the Euro and the United States dollar. You can trade any one currency against another. You can also trade from that currency to another currency to build up additional money and interest daily.
Each exchange where forex trading occurs will open and close and then the next will open and close. This is seen also in the stock exchanges around the planet as different time zones are processing orders and trading in different time frames. The foreign exchange trading in one country determines what happens in other forex marketplaces as the countries take turns opening and closing with the time zones. Exchange rates are going to vary from forex trade to forex trade.
If you are a broker, or if you are just learning about the foreign exchange markets, you must identify what the rates are on a given day before making any trades. The stock market, on the other hand, generally functions according to products, prices, and other business factors that will change the stock prices. If someone knows what is going to happen previous to the general public knowing about it, that is referred to as “insider trading.” Using business secrets to purchase or liquidate stocks and make money is illegal. By contrast, there is very little, if any at all, inside trading information in the FX trading markets.
Monetary trades, purchases and liquidations are functions of the FX market. Very little is based on business secrets. The forex market is more about the value of the economy, the value of the currency and the value of countries.
Every currency traded on the forex market has an individual, three-letter code associated with it so that there is no mistake about which currency or which country one is investing in. The Euro is EUR and the US dollar is known as USD. The British pound is GBP and the Japanese yen is known as JPY. If you want to contact a broker for the purpose of becoming involved in the FX markets, you can locate many brokers on the net. Be sure to check the company's information and transactions before becoming involved with any broker.
© 2011 Robert M. Gillespie, Jr.
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