Forex means foreign exchange market. Forex trading involves betting on the price movement of currency pairs.
There is no physical presence for Forex. It is an open marketplace recognized throughout the world. Trading is conducted 24 hours a day 5 days a week. Currencies of different countries are traded through a network of global Forex dealers and most Forex trading is done online. The goal of Forex trading is for traders to earn profits from foreign currency price movements. Forex trading involves betting on the price movement of a pair of currencies such as the EURO/USD or AUD/USD.
In years past, Forex trading was limited to large international banking concerns, multimillion dollar corporations and very wealthy persons. Today, the majority of Forex traders are individuals who have become disenchanted with the lackluster performance of the stock and bond markets and are looking for a quick and easy profit elsewhere. Forex traders can open an account with as little as $50.00.
The problem is, Forex trading is more complicated than most people think and profits are not so easy to achieve. In fact, 80% of beginner traders lose all their money within a very short time. Investors that choose to trade Forex should begin by learning the ins and outs of the industry through a professional Forex course. Most tutorials are given online and teach the essential aspects of Forex markets. Most are offered by Forex brokers who then go on to invite the student to open an account and begin trading.
Other courses are given independently of the broker. FX Academy, for example, offers a series of courses including quizzes and additional reading material free of charge to anyone interested in signing up.
The Forex market is the largest financial trading market in the world with over $3 trillion traded on a daily basis. It is also highly volatile and the price of the currency pair is contingent on many factors. Social and political factors play a large part in currency prices. When the economy of a country is healthy, the price of the local currency may go up and a profit can be made. On the other hand, the value of the currency can just as easily decrease and you will lose your investment.
Since it is difficult to know how a currency will move, most novice investors look to a broker for direction in trading. Placing trades through a trustworthy and experienced broker can often mean the difference between a profit and a loss. See more on Forex brokers review
The most popular currencies are the USD, EUR, JPY, GBP, CHF, CAD, AUD. Trading consists of the purchasing of a foreign currency and selling it when it has increased in value. The risk is great, however, that you will miss the best price by waiting for it to go even higher and not selling before it starts to drop. That is how most beginner traders lose their money within days of opening a trading account.
Fortunately, most brokerages provide a demo account where you can practice trading with virtual money. This account can be used for several months and by the end of the trial period, you should have enough experience to move on to a real account with your own money.
A warning should be given to all new traders regarding trading on margin. Forex brokers are only too eager to allow traders to use a high leverage-sometimes as high as 200:1. This places the trader in a very risky position whereby he is subject to lose even more than he started with. Many traders have found themselves in this position and have suffered terribly from the consequences. Novice traders should start their trading accounts with the minimum deposit required and gain the experience needed before jumping in full force.
Forex trading can be profitable and fun. But it can also lead to large losses and that is not very pleasant.