What is Forex
Foreign Exchange or Forex is an international financial market for trading currencies. The basic product in Forex market are world currencies and buyers and sellers are the global central and commercial banks, investment, pension and hedge funds, large corporations, brokerage firms and professional traders. Currency is traded in pairs. So on forex you buy or sell some amount in one currency by paying another. For instance in EURUSD pair you buy Euros for US dollars, and in USDJPY pair a certain amount of U.S. dollars is purchased for Japanese yen. The price at which the currency is bought or sold is called its rate in the Forex market.
Transactions are performed via Internet anytime: the market is open 24/5. Back in 2010 the daily turnover in forex has reached $4 trillion and you as well can participate in trading and profit from transactions in the international currency market.
How and why one can make money on Forex?
It is known that exchange rates are volatile, but if banks exchangers rate is changed once a day, forex traders can earn on transactions with currency pairs almost every minute: the price never stands still.
You may earn profit on both growing and falling market. Open Sell order for EURUSD when the euro falls, wait until the rate goes even lower and close the transaction: i.e. buy the same amount of EUR against the USD, but at a lower price. The difference between the sale and buy prices will make your profit. Basically this is the essence of trader's work on Forex.
However earning on forex seems so simple and fast only at first glance. In fact every transaction requires serious analytical work. How do you know when it is the best time to open a trading position? How do you know in what direction the price will move in the next second? How to learn making stable profit and to become a true Forex professional and not just a gambler?
Special tools of technical and fundamental analysis, macroeconomic indices, mathematical or computer indicators, charting figures will help you solve all this questions. By analyzing the state of the country's economy, assessing the possible market reaction to various news releases and studying the price patterns in the past you may make reasonably accurate forecast of future rates. And then on the basis of these forecasts you will be able to design an efficient investment or trading strategy and profit on the forex market.
How to get started on Forex?
Individuals with relatively small amount of money can transact on forex only through intermediaries: professional brokers. By opening an account with a brokerage company you get access to the trading platform, real market quotes, charts, news and analytical tools of the global foreign exchange market. Hence you can monitor the prices, make forecasts and give orders to open and close trades on your behalf.
In addition, the brokerage company provides its customers with leverage, interest-free loan for performing transactions. In fact, you can operate amounts hundreds of times greater than your own funds. At the end of each transaction the loan gets back to the broker and your account is credited with the profit that you managed to receive with the help of leverage. Broker charges spread: a small amount of money equal to the difference between the best Bid and Ask prices for the financial instrument as payment for its service.
How operate the trading platform?
Transactions in the foreign exchange market are executed with the help of a special computer software: the trading platform. This program is also provided by the broker free of charge.
The trading platform provides convenient graphical data for the current rates of hundreds of currency pairs and indices, metals and CFDs, stocks and commodities. By tracking and analyzing the chart the trader can select the most appropriate time to enter the market and to close transactions.
If the analysis of the situation tells you that soon the price of euro against the U.S. dollar will go up, select EURUSD currency pair in the "Market Watch" window of the platform and give the appropriate order to the broker by clicking "Buy". If you believe that the price of the euro will fall against the dollar, press "Sell" button.
Trading orders are executed instantly. Your transaction is displayed on the direct exchange forex market and in the trading platform you can see all parameters of the open position: the opening price, the current rate for the instrument, current profit of the transaction. After the position closing its results are also displayed in the platform and the profit amount is credited to the deposit of your trading account.