New To Forex: Currency Trading At A Glance
Before you even start learning how to trade, you should first make sure that you understand some basic Forex concepts. There is more to Forex than simply buying low and selling high.
Forex is a commonly used abbreviation for “foreign market”. The foreign exchange market is the market where investors and speculators trade foreign currency. They will buy currencies they think are undervalued and sell currency they think are overvalued.
Only closed from Friday evening to Sunday evening, Forex is the largest, and quickest growing, investment market at the moment. It can be said that Forex is a truly global market. There are United States, European and Asian trading sessions.
Although Forex is a 24-hour market, the main currencies in each market are traded mostly during market hours corresponding to each trading session.
There is no central marketplace for the exchange of currency. Since all trading is conducted over-the-counter, investors are able to choose and compare prices at different dealers. Typically, the larger a dealer, the better his prices. Technology has made possible for everyone to trade. The growth of the online trading has been tremendous, and it is only expected to continue. The sheer size of the market allows for the fees to be kept low.
What is especially attractive with Forex trading is that you can get started with relatively little money and trade on leverage. Leverage (trading on margin) can earn you a lot of money, but you can also lose a lot.
Forex is always quoted in pairs, because one currency is always compared to the other. The first currency of a currency pair is called the base currency, and the other is the cross or counter currency. You always have to sell one currency and buy the other simultaneously. When buying a currency pair, the base currency is being bought, and the counter currency is being sold.
There are four main currency pairs: EUR/USD, USD/JPY, GBP/USD, and USD/CHF. The majority of the volume is confined to only eighteen currency pairs, although there are other pairs outside these eighteen. Most currency pairs are quoted to four decimal places. The smallest trade size is called the lot. The unit you count your profit or loss in is called a pip, which stands for percentage in point. One pip is 1/100 of 1%.
Some people think that currency trading is easy… if you are one of them, prepare to lose lots of money fast! Currency trading is not easy, but success with Forex – as with almost every other endeavor worth doing – comes with experience and education. You should be aware of that before getting on board, and never risk the money you cannot afford to lose!
Get started with currency trading on the Forex market with Forex Time (FXTM), an international online forex broker. Forex Time provides services to a wide range of different customer types and offers a vast amount of trading instruments, platforms and accounts.
Written By Anita Bern