Here are few important information regarding the Foreign Trade (FOREX or FX) for the beginners in trading.
Do you have ever come across this term FOREX? What does it mean? Any idea?
Well, FOREX is the exchange of one currency for another at an agreed exchange price on the Over-The-Counter (OTP) market. FOREX is the world’s most traded market, with an average turnover of US $ 4 Trillion per day. These FOREX trading is done online and it is open 24 hours a day from Sunday evening through to Friday night.
Why FOREX trading?
Essentially, FOREX trading is an act of simultaneously buying one currency while selling another primarily for the purpose of “Speculation” (Investing in the hope of gain but with the risk of loss). Currency value may rise or fall against each other due to number of factors like economics and geopolitics. The goal of the FOREX traders is to profit from these changes in the value of one currency against another by actively speculating on which way FOREX prices are likely to raise in the future.
FOREX or Foreign Currency Exchange trading has just become popular than investing in the stock market. People and businesses make money using this FOREX by trading currencies from one country to another. Depending on the exchange rates of various currencies, it is possible to make large amount of cash in this market. But don’t forget to realize that the opposite holds true, as well. This means, you can easily lose large amount of money in an extremely short period. Thus, before entering into this market, it is more necessary to know few of the important things. They are:
How does the FOREX market differ from the other market?
Unlike stocks, currency trading does not take place on a regulated exchange. It is not controlled by any Central government or no clearing houses to guarantee the trades. Perhaps, rather there is no panel to solve the adjudicate disputes. All members get into this business only based on credit agreements.
- FOREX trading is an online trading which allows you to speculate the values of currencies against each other. The values of the currencies are often fluctuating and offer multiple trading opportunities.
- Unlike other markets, FOREX trading market is an online market and open for 24 hours a day from Sunday to Friday.
- This trading follows the clock, opening on Monday morning in Wellington, progressing to Asian trade spearheaded out of Tokyo and Singapore, before moving to London and closing on Friday evening in New York.
- Foreign exchange is the margined product, which requires only deposit of small percentage of full value of your position to place a trade in FOREX. But this actually means that the potential profit or loss, from an initial capital outlay is significantly higher than in the traditional trading.
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What are you really selling or buying in the currency market?
Actually the answer for the above question is “Nothing”. The retail FX market is purely a speculative market. It means you are investing thinking that you can gain but you are also aware of the risk of loss. But really No physical exchange of currencies ever take place. All trades exist just like computer entries and are netted out depending on the market price.
For example, for all dollar denominated accounts, all profits or loss are calculated in dollars and recorded as such in trader’s account. Thus, this FOREX trading exits mainly to facilitate the exchange of currencies for multinational companies that need to trade currencies continuously. But however, these day-to-day corporate needs comprise only about 20% of the total market volume. Remaining 80 % of the trade is speculative in nature, put on by large financial institutions, multibillion dollar hedge funds and even individuals who want to express their opinions on the economic and geopolitical events of the day.
Thus, you would have read about this interesting trading market. Hope it would have been a useful information.
To know more about this FOREX trading for beginners you can visit the following page:
Individual currency speculators can look forward to learn this FOREX trading and start making bucks very Interestingly!