Szeri Nos Biggs answers your questions: What Is Forex?
A market for you to find your freedom and make your dreams come true.
With the crazy markets of today it is very important for investors to diversify and keep their eyes open to new markets. One of the biggest markets right now is Forex. What is Forex? it stands for FOR-eign EX-change. It is basically the trading of one currency to another with intention to gain from the imbalance in demand.
All large corporations and all countries need to exchange their local currency for another in order to do business. The currency that is considered the currency dejure is called a reserve currency (Currently the US Dollar) For example most countries must pay for their oil with US dollars, which means they need to exchange their currency for dollars before they can but oil. Another example is with multinational corporations that need to pay expenses in different nations where they do business.
A smaller but growing part of the foreign exchange market, however, consists of currency traders. Currency traders place orders based on which direction they expect currencies will move. They buy and sell currencies to earn a profit.
On your own you may need a significant change between two currencies in order to make a good profit, however, many currency traders are able to take advantages of even small fluctuations in the market. Currency pairs are priced to the ten thousandth .0001 as EURUSD 1.2065 or to the tenth .01 as USDJPY 113.45.
One major difference between the stock market and the foreign exchange market is that there is almost no inside information. Most significant news is released to the public through news agencies and therefore everyone can have access to the news simultaneously. This is because the fluctuations result mostly from macroeconomics and monetary flows.
A basic thing to know is that each pair of currencies is considered to be an individual product. Each individual currency is given a three letter code. For example, the code for the euro is EUR and the code for the dollar is USD. So EUR/USD is the price of the euro in dollars.
Another major difference is that the market is available . Forex operates 24 hours a day five days a week. It operates between banks with banks, banks with brokers, and brokers with individuals like you and I. The market is open 24 hours a day because when one market closes in the next time zone another market is open leaving the possibility to continually exchange, even into Saturday and starting Sunday evening.
This is good if you are an individual trader, because you can work during the day and trade in the evenings. Or if you suffer from insomnia you can even trade at midnight!
If you start out slow you can easily get a feeling for the foreign exchange market, it isn’t as difficult as it seems. However, it is important to start out slow until you can get a feel for the market. Many would be investors try to start out big and end up loosing big! Don’t let greed get the better of you.
If you are interested in entering the forex world, don’t hesitate it can be well worth it. It is surprisingly a very user friendly market and with all of the fluctuations in the world scene there is a lot of money to be made!
