Forex Education 2: Introducing Forex Basics
Forex is the world’s largest financial market, having a volume in trades of more than 4 trillion dollars daily. Wow! The New York Stock Exchange has 25 billion dollars only a day. Forex is almost 160 times bigger! Even with the stocks and futures markets combined amount, Forex is still 3 times bigger. Wow-wow!
Forex trading involves money, nothing more. Oh, and a speedy computer with fast internet connection. Plus a working knowledge about trading forex. Trading skills can be acquired by reading through the BabyPips’ Pipsology School. Also, a good forex trader must develop certain character traits to become successful. Whew! Quite a handful to achieve but every minute invested on learning the ropes in forex will be worthwhile because this financial market can be highly profitable.
Forex Graduate by Idham Azhari from flickr.com
Nicknames for Foreign Exchange Market:
- FOREX
- Forex
- Retail Forex
- FX
- Spot FX
- Spot
Hi! Mumsie FX is here again, currently reading through the first part of Pre-School: Forex Basics.
So far, I have clearly understood that Forex involves currency pairs because of the simultaneous buying and selling activities on two different currencies. During trading, one currency is being bought and another currency is being sold at one and the same time. Currency pairs examples are: USD/CAD, EUR/USD, or GBP/JPY.
There is no ‘middle man’ in forex; trading is done through a broker or a dealer. There will be more lengthy discussions about brokers and dealers later.
Forex is an intangible market. You cannot hold the thing you bought and sold in foreign exchange trading. Here’s a good explanation: buying a currency is like buying a share in a certain country. When a trader bought the Canadian dollar, he is also buying a share in the Canadan economy because the currency is the direct representation of a country’s current and future economy.
Other financial markets like the New York Stock Exchange, the Forex spot market has no physical location or a central exchange even though it is huge. Since it is electronically run continuously day-in-day-out while within a network of banks, the Forex market is also known as an over-the-counter (OTC) or interbank market.
Before the late 1990s, the initial capital required to start in Forex trading is from 10 to 50 million dollars. Forex is originally intended for bankers and large institutions only—known as the “big guys”. But when the Internet became widely available, lots of online forex trading companies are able to offer services and trading accounts to “small guys” or the so-called retail traders.
What is Spot Forex?
The term “spot forex” is coined from spot market (also known as cash market). It is a market of commodities or securities where the goods are sold for cash and immediately delivered after sale. Although spot transactions can be conducted anywhere, most spot markets exists on the Internet. The spot price is the current price in the market.
The spot forex market typically delivers within 2 days, due to the time needed by banks to move cash from one to another.
Major Currencies Traded in Forex
| SYMBOL | COUNTRY | CURRENCY | NICKNAME |
| USD | United States | Dollar | Buck |
| EUR | Euro Members | Euro | Fiber |
| JPY | Japan | Yen | Yen |
| GBP | Great Britain | Pound | Cable |
| CHF | Switzerland | Franc | Swissy |
| CAD | Canada | Dollar | Loonie |
| AUD | Australia | Dollar | Aussie |
| NZD | New Zealand | Dollar | Kiwi |
Note: Currency Codes in Forex have 3 letters.
Average Daily Turnover by Currency (Source: BIS Triennial Survey 2007)
Find Your Money by white fella from flickr.com
Legend:
| SYMBOL | COUNTRY |
| USD | United States |
| EUR | Euro Members |
| JPY | Japan |
| GBP | Great Britain |
| CHF | Switzerland |
| AUD | Australia |
| CAD | Canada |
| SEK | Sweden |
| HKD | Hong Kong |
| NOK | Norway |
| NZD | New Zealand |
Average Daily Turnover by Currency Pair (Source: BIS Triennial Survey 2007)
Forex Market Trading Hours
The Foreign Exchange Market is open daily for 24 hours around the world, except on weekends. Forex can be traded parttime because the forex markets are always open from sunrise to sunset. Traders can trade late at night or in the morning. Most traders like to be a vampire rather than an early bird. Let’s find out why later.
Trading Forex Online by Bangun Rumah Persada Gallery from flickr.com
|
TIME ZONE |
NEW YORK |
GMT |
|
Tokyo Open |
7:00 PM |
0:00 |
|
Tokyo Close |
4:00 AM |
9:00 |
|
London Open |
3:00 AM |
8:00 |
|
London Close |
12:00 PM |
17:00 |
|
New York Open |
8:00 AM |
13:00 |
|
New York Close |
5:00 PM |
22:00 |
Participants in the Forex Market
The Forex market is one of the largest financial markets in the world. It is also the most popular due to a big number of traders—both individual and organizational.
3 Reasons Why Traders Like Forex OTC (Over-The-Counter):
- Traders can choose who to trade with based on the trading conditions,
- Prices transparency—whether attractive or not, and
- Options on reputable trading counterparts.
Advantages of Forex Trading:
- No extra or hidden charges. Every trade has a fixed rate charged by brokers for services or transaction costs called bid-ask spread.
- Minimal service fee. The bid-ask spread (also called retail transaction cost) is usually 0.1 percent or less, under normal conditions. Large dealers could charge lower—0.7 percent.
- Direct dealing with the market. No need to go through middlemen.
- No fixed size for contract or lot. Spot traders can determine how big or small lot sizes to trade.
- Forex market is almost always open. From Sunday night to Friday afternoon at EST, trading is nonstop around the world.
- No risk of monopoly. Because of its huge size, Forex market cannot be controlled by any entity.
- Leverage! This one is creating a lot of noise lately. The general idea of leverage is to give protection to traders; and at the same leave traders vulnerable to large losses. Leverage allows the trader make profits while keeping the risk capital to minimim—but only when proper risk management is always and strictly observed.
- Forex market is highly liquid. Buying and selling is always just a mouse click away, particularly when under normal market conditions. No risk of getting stuck in a trade. By setting up an online trading platform, trades can be automatically closed at a desired profit level (called the “limit order”) and can also be stopped at a certain point if a trade turned wayward (called “stop loss order”).
- Practice forex trading through demo accounts without charge. Most brokers set an expiration date on demo accounts. Forex tools like charts, forex news, economic calendar, and fundamental and technical analysis are also available without charge.
- Start small in Forex. No need to pour all your savings into this venture. Traders can choose between mini and micro live trading accounts. However, a deposit of $250 or less may be a lot riskier than $1000 initial capital, which is ideal for a micro account. Start with $10,000 for micro accounts.
Whew! That was a long one! And I just got started!
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Before getting any forex software there are a few essential things that ought to be included. The foremost important is security and your online forex trading software ought to embrace a 128 bit SSL encryption that can prevent hackers from accessing any of your personal details and information like your account balance, transaction history, etc.Providing the most effective security for your forex trading will embody a company that has twenty four hour technical server support for your forex software, 24 hour maintenance should something get it wrong, daily backups of all info, and a security system that has been designed to prevent any unauthorized access. Together with these security protocols there are also some forex trading firms that use sensible cards and fingerprint scanners to ensure that solely their workers will have access to their servers.Another vital issue when it comes to selecting your forex software is to test what the corporate’s downtime is like. When it comes to trading forex and significantly your on-line forex trading you wish to confirm that the forex software you select is reliable and out there 24 hours a day. The forex software you select for your forex trading should additionally have technical support out there the least bit times ought to your session be cut short.Making certain that each one the higher than options are listed within the forex software you select can help to ensure your forex trading success.Anyway, a forex software is a must have if you want to earn money.
almost 3 years i’ve been searching the best EA and hope to get rich quickly. And i’ve lost. There is no perfect EA. But suddently i just used MA but the result is so fantastic. I just follow the direction of the MA. I buy when the signal is to buy and sell when there is signal is i have to sell it. I’ve learn while i am working. The capital money is 5000 usd mini account and open only 1 order.
wow. thumbs up from the reader. this is an interesting post.
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The practice of currency trading is also commonly referred to as foreign exchange, Forex or FX for short. All currency has a value relative to other currencies on the planet. Currency trading uses the purchase and sale of large quantities of currency to leverage the shifts in relative value into profit.
great read and informative. brokers do offer many different forms of the surcharge. some are simply placed in the spread others are charged on a per trade basis (mbtrading). some people feel that the practice of stop hunting by brokers is utilized so its always good to be careful.
as with everything else knowledge is everything, if you run into this market unprepared, you can and most likely will fail. the hardest part is keeping those green trades(even the ones with profit taken) green and not to let a few good trades make you lax, and forget your own rules.
the one downside to fx is that it can be time consuming depending on trade style so its always great to have good friends that know the market as well and can talk your language with you, instead of staring blankly when you say the word pip.
power to the trader,
tony
Nice post…Thank you for sharing some good things!!
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Thank you for the detailed post.
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great share, great article, very usefull for me…thank you
Forex Education is very important for a forex trader, it doesn’t matter, he is a new trader or experienced trader.
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You can easily learn forex trading in a short amount of time. I didn’t find it that difficult at all after taking a closer look.