What Beginners need to know about the Market?

Photo: Wikifx

The Forex market, established in 1971, was created when floating exchange rates began to materialize. The Forex market is not centralized, like in currency futures or stock markets. Trading occurs over computers and telephones at thousands of locations worldwide.

The Foreign Exchange market, commonly referred to as FOREX, is where banks, investors and speculators exchange one currency to another.

It is also the largest financial market in the world. In comparison, the US stock market may trade $10 billion in one day, whereas the Forex market will trade up to $3 trillion in one single day.

The Forex market is an opened 24 hours a day market where the primary market for currencies is the 24-hour Interbank market.

This market follows the sun around the world, moving from the major banking centres of the United States to Australia and New Zealand to the Far East, to Europe and finally back to the United States.

Why trade forex？

The major reasons why Forex trading is catching on to the individual trader are Safety, Liquidity, Trade when you wish, guaranteed stop losses, and it is fun.

You do not have to sit in front of your computer all day long to trade the Forex, although once you see the power of Forex trading you might want to.

All you have to do is glance at the charts occasionally to see if the correct entry point is approaching and if it is then get in on the trade.

When you leave your computer and have your trade be closed automatically at the level that you wish, that is what is called a stop loss.

The spot Forex market is the most liquid. Spot, meaning that trades are settled within a day two banking days. There is no central exchange of physical location. Trading takes place over-the-counter, 24- hours a day directly between the two telephones and computer.

Participants in Forex include central banks, corporations, individual investors and speculators, and hedge funds.

There are six main reasons to participate in the FX market

1. Facilitate an actual transaction, whereby international corporations convert profits made in foreign currencies into their domestic currency.
2. Corporate treasurers and money managers also enter the FX market to hedge against unwanted exposure to future price movements in the currency market.
3. Trading is not centralized on an exchange, as with the stock and futures markets.
4. A true 24-hour market.
5. Forex trading begins each day in Sydney and moves around the globe as the business day begins in each financial centre, first to Tokyo, London, and New York.
6. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.

What do you need to trade the FX market?

• Computer/Phones
• Internet
• Money
• Trading Platform
• Knowledge

Reprinted from Wikifx, the copyright all reserved by the original author.