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FOREX Trading / Currency Trading

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FOREX Trading / Currency Trading

Foreign exchange market, or better known as FOREX, is the world's largest and most prolific financial exchange market originated on 1973. Bearing the status of largest and most prolific currency exchange market, FOREX is the center stage where a vast majority of the currency trading or FOREX trading takes place, with a total daily turnover of currency worth more than $1.2 trillion.

For having such an enormous sum of total turnover everyday, FOREX can be considered as a liquid market ideal for Forex trading. Unlike many other securities, FOREX does not trade on a fix exchange rate, instead, currencies are traded primarily between central banks, commercial banks, non-banking international corporation, hedge funds, private investors and not to forget, speculators. Previously, smaller investors are precluded from trading in FOREX due to the large amount of deposit required. However, until the recent years, with the continuous growing of Internet and the rise of competitions, smaller investors can now trade in FOREX as the requirement to trade in FOREX has been amended.

Truthfully, there are a few factors why FOREX trading is starting to attract more and more medium and smaller sized investors. One of the main reasons is due to the fact that FOREX trading operates at 24 hours per day, 5 days per week. In addition to that, unlike the old days where trading is done only through telephone, it can now be done continuously and conveniently between the traders around the globe with the use of the Internet. Besides that, for being a volatile financial market, FOREX is the perfect place for profit opportunities as the markets around the globe fluctuates.
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Forex Trading Platform
The main trading platform in FOREX had shifted from the telephone to the Internet.
In order to start trading in FOREX, the best method available is to approach a middleman or better known as a broker. As we all may know, there are numerous securities and brokers out there, therefore, it is recommended to get a list of Forex brokers from the local regulatory authorities and decide from there which is the preferred broker. Before opening an account with a broker, one would be required to fill in and sign some certain forms as a proof of acceptance of their policies. It is strongly advisable for one to carefully examine through all of the policies in order to avoid future dispute between the investor and the broker.

Before starting in FOREX trading, one must first understand the risk and reward behind margin trading in FOREX. For a margined account, it can be leveraged which means trading in FOREX can be done with solely cash or a combination of cash and collateral such as security deposit. The main risk involved in margin trading is that margin trading tends to inflate the rate of loss. In addition to that, the rate of loss under the combination of leverage and margin trading are extremely huge, which makes FOREX a high risked investment. However, regardless of the downside in margin trading, FOREX trading is still a very profitable trading as a huge rate of loss also means a huge rate of return.

The term INTERBANK is a very common nomenclature in FOREX. This term alone is simply referring to banks and large institutions exchanging information about the rate where their customers or they themselves wish to trade the currency. However, due to the continuous growth of the financial market, this term is now basically referring to any parties who wish to trade their currency in FOREX. According to survey, it is estimated where 70% to 90% of the whole FOREX market is speculative. This means that, 70% to 90% of the parties trading inside FOREX have no intention of accepting deliveries of the currencies, instead, they are just speculating the flow and the movement of the market, awaiting for a profitable opportunity to trade their currencies. Normally, nearly all of the currency in FOREX is traded against the US Dollar and the four most actively traded currencies, the majors, are the Euro, Yen, Swiss Franc and Sterling.

In FOREX trading market, trading is regulated by the Financial Services Authorities and therefore, before anyone starts trading in FOREX, they must first show that they have at least all the basic knowledge needed in margin trading. After all, FOREX trading is a high risk margin trading market which requires a definite understanding of the risk involved behind it.

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