Introduction to Forex Trading

Introduction to Forex Trading

There are many markets: the market for stocks, futures, options and currencies. This is probably the most accessible markets for everyday traders like you and I readily understand the basics of stock trading, and will occasionally use examples from that market.

I started trading stocks, then moved on to trading currencies, because most of the examples I will be using this book are derived from trading currencies.

If you do not know much about currency trading, allow me to introduce you. That's what I trade and I believe it is one of the best markets to trade because of its efficiency. The transaction costs to execute the trade are minimal and most brokers will provide tools and information you need to make your trading decisions, they usually provide them for free. The market is open 24 hours a day which allows you to design your trading hours around your daily commitments. It is very volatile, which is great for those people who are looking for day-trading opportunities.

The foreign exchange market is the market where currencies are bought and sold against one another. People loosely refer to this market under different houses, including the foreign exchange market, Forex market, exchange market or currency market.

The foreign exchange market is the biggest market in the world with daily trading volumes in the amount of $ $ 1,500,000,000,000th All transactions involving international trade and investment must go through this market because these transactions involves the exchange of currencies.

It is the most perfect market that exists because a large number of buyers and sellers all selling the same products. There is free flow of information and there are little barriers to participate.

Currency exchange market is over-the-counter (OTC) market, which means that there is no one specific location where buyers and sellers can actually meet to exchange currencies. Instead, transactions are conducted by phone, fax, e-mail or through the websites of brokers who specialize in foreign currency.

The main centers dealing during the writing: London, with about 30% of the market in New York, with 20%, Tokyo, with 12%, Zurich, Frankfurt, Hong Kong and Singapore, with about 7% each, followed Paris and Sydney with 3% each. Due to the fact that these centers are everywhere in the world, foreign exchange traders can execute transactions 24 hours a day. The market only closes on weekends.

The main players in the Forex Market

The five broad categories of participants: consumers, businesses, investors, speculators, commercial banks, investment banks and central banks.

Consumers, including visitors of countries, tourists and immigrants do not have to exchange currencies when they travel, so they can buy local products and services. These participants have no power to set prices. They only bought and sold in accordance with the prevailing exchange rate. They form an important part of the volume traded in the market.

Businesses that import and export of goods and services required for the exchange of currencies to receive or make payments on goods that can be bought or services, they can be rendered.

Investors and speculators require money buying and selling investment instruments like stocks, bonds, bank deposits or real estate.

Large commercial and investment banks are price makers. "They are the ones who buy and sell currencies at the bid-and-offer rates that they declare through their foreign exchange dealers.

Commercial banks deal with customers on the one hand, and with the Interbank or other banks, on the other side. They profit by using the supply-and-offer spread. The bid price is the exchange rate that the buyer is willing to buy and offer price is the exchange rate at which the seller is willing to sell. The difference is called the bid-offer spread. They also make profits from speculating about whether the exchange rate will rise or fall.

Central banks participate in the exchange market in their effective duty as banks for their particular government. They trade currencies not for the purpose of making profit, but to ease monetary policy and government to help ease out of fluctuation in the value of the currency their economy.




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