Forex Trading

Written by ForexCult Team
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Forex Trading When considering forex trading it is an essential that you know the forex basics which will allow you to have a proper introduction into the forex market. As you may know the “Foreign Exchange Market” is also known as the “FX” or the “Forex Market”. This particular market is known as the largest trading or financial market that is located within the world. It has a average daily of United States one point nine trillion dollars in turnovers on a daily basis, which when you think about it is over thirty times greater than what all the United States Equity Markets make in a combined volume. In case you are not too familiar with the foreign exchange market, you should know that the foreign exchange market is the spontaneous purchasing of one particular currency and the selling of a different type of currency. You should also take note that when you are trading in the foreign exchange market that the currencies are sold or traded in groups of two known as pairs. For instance, you may have the EURO/US Dollar and then you may have the USD/JPY, the first pair is a symbol for (EUR/USD) and the second one is an example of (USD/JPY). Forex Trading and Purchasing Currencies When taking the role as a trader in forex trading you should know that there are a couple of main reasons to purchase and sell different types of currencies. In some cases you have companies all over the world and also governments that purchase and sell different products and or services to other countries all over the world and must convert the profits that they have made in other countries into profits or currencies that are acceptable in their own country, this averages around five percent of the daily turnover in forex trading. The other ninety five percent of the daily turnover is provided by traders trading to make profits and traders that are solely in it for the speculations. Now let’s talk about forex trading and speculators. When it comes to forex trading, the speculators find that the absolute best trading is in the opportunities that include the mostly traded currencies which are also referred to as the greatest liquid currencies which are called the majors. In fact, in today’s forex trading, over eighty five percent of all the daily transactions that take place include the involvement of trading the majors or the most liquid currencies. The most liquid currencies include all of the following currencies: the US Dollar, the EURO, the Japanese Yen, the Australian Dollar, the Canadian Dollar, the Swiss Franc, and the British Pound. Forex Trading a Twenty Four Hour Market Forex trading is a true twenty four hour market in which forex trading starts each and everyday with a start in a place known as Sydney and then it takes its turn around the world to make sure that it includes each individual financial center as their business day also begins. After Sydney, the forex trading starts in Tokyo, then it makes its way to London and then to New York. When it comes to forex trading in the foreign exchange market, you will find that its very unique from all the other financial markets in the respect that it is in a state where the investors that are involved in the market can respond quickly to the currency fluctuations that are caused on a daily basis by economic events, social events and also political events during the exact time that these events take place whether it is during the day or at night time. Forex Trading, a “OTC” Market As you may or may not know the forex market is also known as an “OTC” or “Over the Counter” market. The forex trading market is also referred to as an interbank market. The reason that the forex market is known as an interbank market is because of the fact that the transactions that take place on the market are actually conducted between two different counterparts whether it is over the phone lines or by electronic networks. As you may or may not know forex trading is not centralized or localized around an exchange, whereas stock markets and futures markets are centralized an exchange. Now lets talk about forex trading and “bid” and “ask”. As a trader in the forex market you will notice when you are trading forex that you will often see a quote that is two sided meaning that it consists of a bid price and also an ask price. It is important that you truly understand the difference among the two different parts, the bid is known as the actual price at which you can actually sell the currency that is the base currency and the ask is the actual price that you as the trader can buy or purchase the base currency.