Forex Trading Made Easy:
Introduction to the Forex Market

Forex is actually a combination of the term “foreign exchange.” This market is the largest in the world in terms of cash and deals with foreign currency and exchange rates. There is a high trading volume and it is extremely liquid. Currencies that can be traded from many different countries. Participants in the Forex market include banks, governments, corporations, small-scale speculators, government officials, and corporate investors.

The Forex is different from stock market and other financial markets in many ways. For one thing, the Forex market has a 24-hour trading day and runs 5 days per week. Also, there is no stock exchange similar to the NYSE. Instead, primary trading is done over-the-counter via the spot market. Large Forex transactions are done on the inter-bank market where banks trade with each other on behalf of their customers. Huge difficult to handle trades are made easy on this market for larger speculators. Individuals primarily trade through brokers and dealers, as their volume is at a lower level.

Because there is no exchange, this means trading is actually done differently. In the stock market an order is given to a broker who makes the trade with another broker/dealer or an exchange. With the Forex, brokers take the other side of the customer trade and they make their money from the spread between the bid and offer prices. Because of this, most brokers don’t charge commissions.






Another big difference is that the Forex market is 100% margin-based. Wow, 100% margin and a 24 hour trading day? Does this mean Forex trading is made easy for you and me? I think so!

Spot Forex trading is basically trading a 2-day forward futures contract. You do take possession of the currency, but you have and agreement to do so in the future. This allows you to benefit from prices changes. Your broker requires a deposit on your trades in case you have any losses. The deposit varies from as little as 1/2% to 2% of the value of the position. The less the deposit the more risk involved. Although this is trading on margin, it is not a loan. Your broker does not lend you money and there is no margin interest charged. You may even earn interest on your deposited funds. These differences make for a very interesting new arena for trading enthusiasts to explore.

Forex Trading Made Easy: What
Influences Forex Trading?

These days you can tell that the Forex has made many stock traders reevaluate their investing style. The involvement of several countries with varying time zones is makes this a 24-hour market. So now traders are thinking about whether to trade the stocks they are used to or currency. They also may be worrying about the markets late into the night thinking they may be missing out on trades.

Market participants carefully monitor economic indicators and changes including the Gross Domestic Product (GDP), interest rates, and inflation. Monitoring these economic indicators allows traders to know when it is time to buy or sell. It is also beneficial to review the news as it becomes available instead of waiting for individual markets to open. These are some of the ways Forex traders make their money.

I hope you enjoyed this introduction to Forex trading made easy. There is a lot still left to learn. Just keep at it and eventually you will discover the many intricacies involved in Forex trading. Armed with this knowledge and with access to a good broker, you will be able to capitalize on your learning and (hopefully) turn a profit. I wish you well and may you have many profitable trades with this hot new arena.

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