Monday, August 17, 2009

Introduction (Forex Basics)

What is Forex?
Forex or Foreign Exchange Market is the largest financial market in the world with a volume of over $4 trillion a day.

Forex or Foreign Exchange is a place or spot where currency trading takes place where banks and other official institutions can easily buy and sell currencies.
What is traded on the Forex Market?
Money. Forex is the buying of one currency and the selling of another. Currencies are traded through a broker or dealer and usually traded in pairs.

What is a spot market?
A spot market is any market that deals in the current price of a financial instrument.

Which currencies are traded?
The most popular currencies:
USD (United States, Dollar, Buck)
EUR (Euro Members, Euro, Fiber)
JPY (Japanese Yen, Yen, Yen)
GBP (Great Britain, Pound, Cable)
CHF (Switzerland, Franc, Swissy)
CAD (Canada, Dollar, Loonie)
AUD (Australia, Dollar, Aussie)
NZD (New Zealand, Dollar, Kiwi)

When can currencies be traded?
The market is open 24-hour a day.

Timezone New York GMT
Tokyo Open 7:00PM 0:00
Tokyo Close 4:00AM 9:00
London Open 3:00AM 8:00
London Close 12:00PM 17:00
New York Open 8:00AM 13:00
New York Close 5:00PM 22:00

Why trade Forex?
Some of the advantages to trade forex are:

No Commissions.
- No clearing fees, exchange fees, government fees, brokerage fees. Brokers are compensated for theirs services through something called the "Bid-Ask Spread".

No Middlemen.
- Forex allows you to trade directly with the market responsible for the pricing on a particular currency pair.

No fixed lot size.
- In forex, you determine your own lot size which allows traders to participate with accounts as small as $250 (but this is not a very good idea to start with especially for those who are really new to forex).

Low transaction costs.
- The retail transaction cost (bid/ask spread) is typically less than 0.1 % under normal market conditions but it depends on your leverage.

A 24-hour market.
- You can trade when you want (Sunday evening until Friday afternoon EST).

No one can corner the market.
- The foreign exchange market is so huge and has so many participants that no single one (not even a central bank) can control the market price for an extended period of time.

- It gives the trader the ability to make nice profit and at the same time keep risk capital to a minimum.

High Liquidity.
- It means under normal market conditions, you can buy or sell at your own will with a click of a mouse.

Free "Demo" Accounts, News, Charts & Analysis.
- Most online Forex brokers offer demo account to practice trading along with breaking Forex news and charting services and its all free!

"Mini" and "Micro" Trading.
- It means that people who have small capital can trade Forex with $300 as a start-up trading capital.

What Do I Need To Start Trading Forex?
A computer with a high-speed internet connection and knowledge about Forex Trading.

How Much Capital To Trade Forex?
At least $1,000 to start for a micro account and for a mini account, at least $10,000 to start.


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