Last Updated on July 13, 2012 by Mike

Forex Trading

The Foreign Exchange Market

The world’s currencies are being traded 24 hours a day, five days a week under the forex trading system. Forex, which can also be written as FX and the currency market, stands for foreign exchange, where all of the world’s currencies are being bought and sold by speculators.

The foreign exchange market was created in the 1970s in order to make it possible for companies that do business in different currencies to be able to do business with each other. It became a portal for companies to convert their own country’s currency into the currency of another country. This makes it possible for one country to pay another without inconveniencing the other country with needing to convert their payments into other foreign currencies.

One of the greatest features of forex trading is its enormous liquidity. Several different types of entities engage in forex exchange trading such as large banks and even small investors. The country that participates in the forex trading game more than any other country including the United States is the United Kingdom. Forex trading UK is equal to 36.7 percent of all forex trading. The city of London is the major center for forex trading, and this is where people from other parts of the world obtain the market price for currencies with the start of each new trading day. The UK is highly important in the world of forex.

The forex trading market offers speculators a great deal of flexibility, because it is open 24 hours a day. Forex trading Australia begins each trading week in Sydney when it is 5:00 p.m. on Sunday in the United States and travels around the globe. This makes it possible for people to act immediately if they need to when they discover that the prices have been fluctuating, and they need to take some sort of action.

What speculators find the most appealing about the foreign exchange market is that it offers them a great deal of leverage. Speculators can open a trading account with a small amount of money, sometimes $250, and with it they can borrow much more money from their brokers in order to make their trades. Most brokerage firms make it possible for their clients to leverage their trades on a 100:1 ratio. This strategy is called maximizing their profits.

Speculators can also minimize their losses. They do this by introducing the stop-loss order. The stop-loss order means that the trader has picked a price below which they would not like their trades to fall. For example, if a trader has speculated that a price will rise, but it actually ends up falling, this trader can set a price below the purchase price that will end the transaction, minimizing the trader’s losses.

What Is Forex Trading?

Forex trading means that people are purchasing one currency by selling another at the same time. That is how the word exchange became a part of the name; the one currency that is being sold is being exchanged for the one that is being bought. Although the forex trading market was created to make it possible for countries to do business with each other, most of the people who are exchanging currencies are not in business. Ninety-five percent of the transactions that happen in the forex trading market are between speculators who are seeking to make a profit.

Similar to other types of trading, the foreign exchange market relies on buying and selling procedures. The terms used to describe these two different actions are bid and ask. Those who are in the market to sell a currency will be referring to the bid price, and those who would like to buy a currency are referring to the ask price.

Forex Futures Trading

One type of forex trading is forex futures trading. Those who are trading in the futures or commodity market are making a deal to purchase a particular currency on a specific date called the expiration date. For those who are speculating, the sale does not end up going through, because the contract will be sold before the sale date. Speculators perform these actions in the forex future trading market in order to make a profit.

In commodity forex online trading, the calculation for determining whether or not a profit has been realized is simple subtraction. Those who purchased their currencies for more than they sold them lost money, and those who purchased their currencies for less than they eventually sell them for have earned a profit. These contracts must be sold before the expiration date, or else the speculator will be forced to honor the contract and purchase the currency, and this is not in the plan for speculators.

Forex Simulator Trading

Forex simulator trading is an account with a broker that allows people to practice trading a forex account before they invest their own money. Trading accounts are typically opened with $10,000, and this is also the amount that people can trade their simulator accounts with. As forex trading requires that people study charts, brokerage firms also give their practice clients access to the charts that make it possible to trade the account.

Charts In Forex Trading

Charts are important because they aid people in performing their technical analysis for forex tip trading. Speculators often do technical analysis, because it helps them to determine which way the currencies are likely to travel, up or down, based upon what has happened in the past. As currencies tend to follow price histories from the past, speculators have a good idea of what will happen to a currency when similar conditions present themselves again.

For example, signal is the name given to patterns that have been presenting themselves over and over again in similar ways throughout the history of the foreign exchange market. These signals are known to be highly predictable, and those who study the charts to find these signals, generally, know which way the currency is likely to go. They also know that foreign currencies do not fluctuate an extreme amount on a daily basis, but that they tend to move in trends; the three trends are to move up, down or sideways, and they will be likely to remain on the course they choose for a good amount of time.

In order to know how long a trend will last, for example, speculators have more charts to study that will help them decide whether or not they can purchase a particular currency. If they have determined that there is an up trend for a currency and that this trend seems as though it will continue for a good period of time, this is the time that speculators will decide to buy. They will also use these charts to help them decide when it is time to sell their current positions.

Technical analysis is not the only type of analysis that speculators have to depend on; they can also engage in fundamental analysis. Fundamental analysis seeks to determine what the trends will be based upon when studying the economic indicators present in each particular country. By studying the economic trends, speculators can see if they spot a pattern that will tend to move the currency up, down or sideways. As the fundamentals are also very important and will be responsible at times for whether or not a currency loses or gains value, fundamental analysis is just as important as technical analysis. Those who are the most successful in FX trading forex take both fundamental and technical analysis into consideration.

Forex Trading On The Internet

Internet forex trading has made it possible for people to trade foreign currencies over the Internet from their own homes. Trading through a brokerage firm over the Internet also reduces the prices each trader has to pay per trade; forex trading requires that speculators pay fees for each trade they execute, and they also will have to pay commissions to their brokers. With an Internet forex trading account, these fees and commissions have been reduced.

The brokerage firms give their people price quotes so that they can trade their accounts from an informed point of view. Those who have forex trading simulator accounts also can access these quotes in real time. They will have the capability to perform all of the actions that regular accountholders can do such as hedging. If people with practice accounts need help, they will receive it by calling the customer service line.

The forex trading station is a forex trading program software that makes it possible to trade a practice account as well as a live account, and it is a software program that is currently being used for forex trading Canada. With the forex trading station, speculators have the ability to perform their analysis from charts contained on the system. Once they have chosen a currency to trade, they can place their buy and sell orders through the software. They will also be able to see how their currencies are performing by watching current movements on charts in real time. The forex trading station has been created to be easy to use, even for those who are not computer savvy in Canada forex trading.