| Forex trading is becoming more popular as time goes | | | | announcements), or during off peak hours. |
| by. Perhaps you have heard of forex trading, or | | | | Since you are buying and selling currencies at the |
| heard things such as "the dollar fell sharply against the | | | | same time, it doesn't matter whether the market is |
| yen". Not sure what all this means? Here is a basic | | | | up or down. You can make money either way. For |
| overview of forex trading. | | | | example, if the GBP/USD is going up, it means the |
| The foreign currency exchange market (forex) is the | | | | pound is stronger than the dollar. If you think good |
| largest market in the world. Much larger than the | | | | economic news is coming for the dollar, you may |
| stock market! Some of the reasons for its popularity | | | | want to sell the GBP/USD and buy USD/GBP. |
| are that leverage allows maximum usage for your | | | | Price quotes are based on pips - which is the smallest |
| money and there is very high liquidity. The forex | | | | unit that a pair can trade at. It is the very last |
| market is also open 24 hours a day, although some | | | | number on the right of a quote. For example if a |
| hours are much better trading times than others. | | | | currency bid is 1.0345 and the ask is 1.0347 - the |
| Forex is traded on margin. This means that you can | | | | difference is equal to 2 pips. This is the spread that |
| control a large amount of money for a small bit of | | | | was mentioned earlier. |
| cash. With a 1% margin, $1000 in cash would | | | | There are two types of forex traders, those that |
| leverage you one hundred thousand in the forex | | | | are technical traders and those that are fundamental |
| market trading. What this basically means is that your | | | | traders. Technical traders base their trades on a lot |
| rate of return (or ROI) is going to be 100% for each | | | | of different statistics and parameters. Viewing past |
| percentage change upwards. Of course, this means | | | | patterns the currencies form will give a technical |
| that your loss would be equally as great if the | | | | traders strategies on which pairs to buy or sell. |
| market went against you. | | | | Technical traders don't necessarily take news into |
| Forex trades are always done in pairs. You always | | | | consideration and often don't trade during big news |
| purchase one currency at the same time as you sell | | | | breaks. Fundamental traders work only with news. |
| another. While there are many pairs in the forex | | | | They have a calendar marked with big market news |
| market, there are really four major currency pairs: | | | | days, such as job numbers, consumer confidence, |
| USD/JPY, USD/GBP, GBP/USD and USD/CHF. These | | | | retail sales, etc. They then plan their strategy to buy |
| pairs see the most market activity. | | | | and sell based on what those numbers are predicted |
| When you work with forex trades, you do not pay a | | | | to be. |
| commission fee per trade, unlike the stock market. | | | | If you are interested in learning more about forex, |
| What you do pay is a spread. That is the difference | | | | there are many website with free training available, |
| between the asking rate and the bid rate of the | | | | or you can purchase courses to learn. Take the |
| currency pair. The spread is determined by the | | | | opportunity to open a free 'game' account, such as |
| trading company you work with. The spread is how | | | | at - and practice trading whichever strategy you |
| they make their money. Be careful in trading, as | | | | want to follow until it becomes second nature. This is |
| some brokers will increase the spread during big | | | | a great tool before you actually put real money into |
| news breaks (such as non farm payroll | | | | the market! |