What is Forex?
Forex is a shortcut for “Foreign Exchange Market”, an international market where currencies are bought and sold by people, companies and institutions. Thanks to technological advancements and the Internet, everyone can trade on forex 24 hours a day, 5 days a week (The market is closed on Saturdays and Sundays). In simplest terms, trading on forex is about buying certain amount of currency, expecting it’s value to raise in comparison to other currencies.
The purpose of this website is to give free information, helpful reviews, forex description and forex strategy in such way, that everyone, without having specialist knowledge, could understand it. In reality, it’s similar to simple Internet shopping, with the main difference that the merchandise we’re buying are the currencies, and if they rise in value, we are earning money.
Forex – the basics
Increasing popularity of currency trading on forex has been observed as early as late nineties, as more and more barriers that prevented investments from small investors on forex were overcome. Before the Internet became as popular as it is today, investing on forex was reserved almost exclusively for banks and large institutions. Thanks to currency trading platforms available on the Internet, investing on forex became a way to earn money for everyone. If you had previous experience with stock trading, this website will surely explain to you the differences between stock and forex trading, and if you don’t have such prior experience, a whole deal of new possibilities will open for you.
Most commonly traded currency pairs are: EUR/USD, USD/JPN, GBP/USD, and USD/CHF. In later parts of this tutorial you will learn that the most profitable transactions are made on those pairs. Most commonly made transactions are made with use of USD, because it’s the most fluid currency, and the fact that there are always a lot of people or institutions that need to either buy or sell it means that there can be huge variance of asking price – since your profit comes from change of price, it’s only natural that the currency whose price varies the most is the best earner. There are many other, less popular, currency pairs on forex, but focusing on those, most often traded, that I mentioned above is enough to succeed.
As I mentioned in the beginning, forex is a shortcut describing currency exchange market, where all major world’s currencies are bought and sold. Forex is the biggest finance market in the world in terms of daily turnover – it reaches up to FOUR BILLION DOLLARS – it’s almost thirty times more than New York stock exchange.
The most common currency transaction, that everybody knows, is buying foreign currency, when you’re going abroad. Everyday for our dollars we can buy variable amount of foreign currency, exchange rate is changing constantly. This variance of exchange rates if an opportunity for every investor to earn big money – right on forex. For it to be possible, you need to prepare through-fully.
The purpose of trading on forex is exchanging one currency to another, with assumption that the value of currency we just bought will rise, compared to the one we just sold. Trade is commenced via currency broker, or simpler – forex broker. Currencies are always displayed in pairs, for example EUR/USD (Euro/United States Dollar). In each pair first currency is called “base currency”, and that’s the one who gains value when the pair’s price is increasing. When pair price is lowering, that means that the base currency is losing value.
Forex – open 24 hours a day.
Forex is an unusual market. The exchange occurs in continuous system. There is no single central point, which manages the forex, nor trading pit, as in the case of the stock market. Forex is an Over-the-counter (OTC) market, and transactions are electronic and occur on interbank market. Currency market is opened during weekdays (Monday – Friday), 24 hours a day. It is, however, closed during weekends.
As I mentioned earlier, interbank currency market hasn’t been available for small investors until recently. Thanks to technology advancements, forex brokers opened investing opportunities to almost everyone, thanks to internet investments platforms. Those platforms are a simple to use interfaces, with which we can conduct all transactions at our forex broker with only a few clicks of mouse. Individual clients, like me and You, can obtain access to this market via professional broker companies, but in reality, it’s us who is making all decisions and buying or selling any currency pair is only a matter of single mouse click.
At this point it’s worth mentioning that possibility of trading by individual persons is still relatively new. Each year every investor can expect new “quality of life” changes and new functions as they get implemented. However there’s also a second, darker, side of such situation – since all those solutions are quite new, it’s easy to encounter dishonest companies, who hope to use newly discovered niche, and cheat beginner investors out of their hard-earned money. It is extremely important to learn basics of forex before we head into more advanced subjects, like trading systems, investor courses etc. This website has been created to provide as broad as possible view of forex investing, in order to help beginner investors minimize the risk of failure. On one side, it is important to keep in mind that every investment carries some amount of risk, on the other, keeping that risk in mind, but with possibility of huge return, you need to gather as much information as possible, in order to determine whether the risk is worth taking.
On first sight, while looking at various forex websites, the sheer number of graphs, stats and spreadsheets can be intimidating. In reality it is much simpler, than it appears. I’ll present the most reliable services that you can use, but I won’t give you recipe for success, since there is none. Investment is always a risk, but you can minimize it by careful preparation and by using reliable brokers. Forex is definitely one of most exciting way to earn money from the comfort of one’s own home – 24 hours a day.