Forex trading, the abbreviation for foreign exchange, is one of the best known currency trading network in the world. It is also the largest, with a rate of no less than $3 trillion per day, as trades value. Only a small percentage of these trades belongs to companies and governments, though. Most of the conversions are made by speculators.
The main difference between Forex trading and the stock market is that Forex functions on the basis of an interbank market (an Over The Counter type of market) and is therefore not subject to change depending on the central exchange rates. Forex trading has several places around the world and all operate 24hrs a day and each and everyday. The counterparts always discuss the trade, via phone or on the internet.
In order to make a Forex trade, you need to simultaneously buy a currency and sell another. The symbol used in this kind of trades is the cross, which can be symbolized as “EURUSD”, “GBPUSD” or “USDJPY”, and the main market that traders aim at is the spot market (called “spot” because of the immediate settling of the trades). Always be weary of the interest fees as they change in every country. Theredore that is the factor if you benefit from gaining or not. .
Forex trading allows you, unlike other trading markets, to use more than your actual capital in the trades you make. This is called “trading on margin”; this will allow you to benefit out of the fluctuations of the exchange rates. For example, a margin of 1. 0% will allow you to trade a maximum sum of $1 million, even if your capital is only of $10,000.
Some of the positive aspects of using Forex trading are: 24/5 availability, enough buyers to trade with at any period, commission-free trades and the possibility of gaining on one hand after dropping on another as a consequence of falling markets.
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Stephens, Benjamin L. "Forex Trading – Understanding The Concept And Some Of The Tips Behind It." Forex Trading – Understanding The Concept And Some Of The Tips Behind It. 22 Jun. 2010. uberarticles.com. 1 Aug 2014 <http://uberarticles.com/finance/forex-trading-understanding-the-concept-and-some-of-the-tips-behind-it/>.
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Stephens, B (2010, June 22). Forex Trading – Understanding The Concept And Some Of The Tips Behind It. Retrieved August 1, 2014, from http://uberarticles.com/finance/forex-trading-understanding-the-concept-and-some-of-the-tips-behind-it/
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