Forex Trading For Newbies, Day 1 - The Basics of Forex Trading

Welcome to the first day of my five day eCourse on Forex trading.

I hope that you find this information valuable and that it helps you start to trade confidently in the Forex market right away.

At any time if you would like to jump ahead you can use the link at the bottom of this article to check out my four-hour plus video training course.

The Basics of FOREX Trading

What exactly is FOREX trading?

Put simply, FOREX trading is the buying and selling of international currencies. Traditionally, participation in the FOREX market was confined to major banking and trading institutions.

In recent years, technological developments have opened up this once exclusive arena to smaller companies and even individuals by allowing them to trade currencies online.

The world's currency rates are not fixed. They follow a floating exchange rate and are always traded in pairs Eurodollar, Dollar/Yen, etc. Most international transactions are exchanges of the world's major currencies.

When it comes to Forex trading, there are a number of major currency pairs.: Euro v. US dollar, US dollar v. Japanese yen, British pound v. US dollar, and US dollar v. Swiss franc.

These currency pairs are considered major in comparison to the other currency pairs because of their trading volume.

In the FOREX market, these relationships are shortened: EUR/USD, USD/JPY, GBP/USD, and USD/CHF

They may also be listed as follows (without the slash): EURUSD, USDJPY, GBPUSD, and USDCHF It is also important to remember that there are no dividends paid on currencies. If you are a trader in the FOREX market, you look to see whether one currency's value will appreciate against another currency. When this is the case, you exchange the latter for the first. Ideally, you will be able to exchange the first currency for the other at a later time and collect a profit from the trade.

FOREX transactions are typically conducted by professionals at major banks and brokerage firms. FOREX trading has long been an important feature of the international market. At all hours of the day, currencies are being traded by brokers around the world. In fact, the FOREX market operates virtually twenty- four hours a day and five days a week with traders at international banking institutions working a number of separate shifts. The FOREX market is different from the normal stock market in the fact that price shifts are much smoother and do not result in significant gaps. Each day the FOREX market turns over trillions of dollars, allowing traders to enter and exit certain position very easily.

As you can see, the FOREX market is a dynamic and continuous system that basically never sleeps. To be sure, even on September 11 in 2001 it was still possible to obtain currency quotes.

Also known as the foreign exchange market, or FX, it is the oldest and most expansive financial market in the world. In comparison, the currency futures market is a mere one percent the size of the FOREX market.

Trades are brokered between major banking groups and circulate around the globe, from America to Australia, to Asia, to Europe, and back to the U.S. For a long time, financial prerequisites and hefty minimum transaction amounts put the FOREX market out of reach of small traders. Consequently, at one time major banks and financial institutions were the only parties that could benefit from participation in the FOREX market's fluidness and strong exchange rates.

Today is a different story. FOREX market dealers can divide large units within the market, allowing smaller corporations and even individuals the ability to trade these smaller units. Even though it is the oldest financial market in the world, the FOREX market has evolved a great deal in a short amount of time.

High-speed internet connections and sophisticated online Forex trading platforms has definitely made it easier for individual traders to get involved in Forex trading and to be very successful at it. This basic guide is your first step towards a successful future in trading in the extremely lucrative FOREX market place.


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