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INTRODUCTION OF FOREX

 

INTRODUCTION TO FOREX

 

Why is Forex such a big opportunity?

 

Can you imagine a market that is virtually open around the clock and that trades 4 trillion dollars a day? A market that is truly “equal opportunity”, because it’s big enough to prevent any one investor, big or small, from trying to impose their own rules? That’s the foreign exchange market, also known as Forex.

 

How does it work?

 

It’s simple. You use money in one currency (for example, the one you use in your everyday life) to buy money in another currency, when the exchange rate is in your favor. When the exchange rate changes in the right direction, you sell the other currency back again for more than you paid for it. You then keep the difference.

 

Where does the “exchange” take place?

 

As an individual buyer and seller, you trade in Forex through a broker. There is no physical exchange of currency and transactions are either handled over the phone or, more and more, via online Forex trading platforms that you access via Internet. Instead, each “trade” or exchange of currency is in effect a contract to be respected and is defined in terms of:

 

  • The “currency pair” – this is the currency you are buying and the one you are selling

  • The amount of currency in the transaction (the “nominal” or “face” amount)

  • The exchange rate between the two currencies for that particular trade

 

Who can trade in Forex?

 

Practically anyone. People like you. And also funds managers, corporations and banks. The range is wide open. There are no special exams to pass or qualifications to be earned. What’s more important is your common sense, and being realistic and organized.

 

How long does it take?

 

There are no pre-set limits concerning the length of time to trade. It’s one of the areas where Forex is very flexible. Some traders will do their transactions very rapidly, whereas others make their money over longer periods of time. Whatever the case, Forex has some important advantages to be aware of:

 

  • You can always stop a trade rapidly (by a simple click of a mouse, for instance) and start a new trade if this is better for you

  • You can convert foreign currency easily back into your original or base currency, so that you can pocket winnings without waiting