Forex Trading

Here is a quick guide to Forex Trading. We will aim to explain what Forex Trading is, why Forex Trading has become so popular, how to get started in Forex Trading, and how to get successful at Forex Trading.

First of all, What is Forex Trading?

All around the world money is being transfered from one country to another, 24 hours a day of the working week. For this to happen, the money is effectively being traded from one currency to another.

The market that the currencies are exchanged on is called the Forex. And it is this market which Forex Trading takes place upon.

This Forex market is the biggest financial market in the world. Each day and estimated 1.5 Trillion US Dollars are traded here. This is about 100 times more than what is traded on the NYSE each day!

Due to the nature of when and where currencies are being traded, the market is open nearly all week, 24 hours a day. Forex Trading starts when everyone goes to work in New Zealand on a monday morning until the end of the working day on friday on the west coast of the USA.

Unlike most other markets, the Forex is not governed by any sort of central body. Forex Trading takes place directly between whoever is buying and whoever is selling. It is often thought of as being similar to the OTC (Over The Counter) market.

Why is Forex Trading So Popular?

Over the past few years the popularity of Forex Trading has exploded and there are several reasons for this. These reasons include:

• Liquidity - Forex Trading has the most liquid market around - especially on the most popular currency pairs. If you are buying/selling there is pretty much always someone wanting to sell/buy. This superior liquidity leads to tight bid/ask spreads and price stability.
• High Leverage - If you open a spot Forex Trading account, you will be entitled to 100:1 leverage. This makes it possible to start day trading with a fairly small initial trading capital.
• 24 Hour Trading - Making Forex Trading accessible to traders all around the world. This also opens opportunities for tradeable and volatile situations due to breaking world news.
• No Commissions - Most Forex Trading accounts do not charge commissions on trades. Brokers profits are generally made on the Bid/Ask spread.
• Profiting In A Downtrend - Selling a currency is as easy as buying, so profiting in a falling market is easy.

How to be Successful at Forex Trading

Becoming a successful Forex Trader is just as hard as becoming a successful Stock Trader or Futures Trader. Forex Trading requires the same skills as other forms of trading, including a having a solid trading plan and a good understanding of the market.

Think about some goals that you would like to achieve in Forex Trading. Then formulate a strategy to achieve these goals. Remember to always thoroughly research and test your ideas and trading plan before losing all your trading capital to the Forex Market!

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