Forex trading is simply the trading of foreign currencies, one against the other, always done in pairs. It takes place around the world, 24 hours of the day, except for weekends. Typically, forex trading is done through a forex broker, who will often offer a forex bonus. Forex is one of the largest markets in the world today, with more than $4 trillion of transactions done daily. You may have never heard of it before, but you have probably unwittingly taken part in a forex trade, at least once already in your life. If you have visited another country for business or a holiday, you have exchanged money. This is a forex trading transaction. Likewise, if you have ever purchased a product manufactured in another country, this is an indirect form of forex trade.
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The worlds banks, insurance companies and hedge funds all trade in currencies, as a way of making money. They make their trades in very large sums of money, and so are able to make large profits from just a small fluctuation in the exchange rate of a currency. Historically, this type of forex trading was solely undertaken by large business and professional companies. The average man on the street was not able to participate.
In the 1990’s forex trading online revolutionised the forex trading market. Forex trading platforms were now available to anyone. It was now possible for the average person to open a forex trading account. With access to a computer, an internet connection, the best forex trading platform and the right forex trading software, you can open a forex trading account and take part in this form of investment. What is forex trading, is a question that is no longer difficult to answer.
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REASONS TO PARTICIPATE IN THE FOREX TRADING MARKET
Forex trading online has become very popular in recent years for a few simple reasons.
- Trading is low cost. There are usually no commision charges or other fees. The trading cost is spread between the buying and selling price.
- The forex trading market never sleeps - except at weekends.
- There is no bear market. Money can be made (or lost) at any time. There are no restrictions when a currency's rate is low.
- Liquidity is unmatched. It is relatively easy to get in and out of trades at any time.
- Leverage levels are high. This allows you to take advantage of relatively minor fluctuations in the value of a currency. It also increases any gains. On the other hand it can also result in huge losses.
- Exposure is international.
Overall forex trading is one of the best ways to profit online using your brain, rather than gabling around. Just be careful, have a proper "bank management" and you will on top of the wave. As you can see the above reasons are pretty obvious so use our knowledge to get better in the forex trading.
THINK ABOUT YOUR FOREX TRADING STRATEGY
There are many resources available to the novice forex trader. Many forex brokers offer free tutorials and demos that will help you devise your very own forex trading strategy. One important thing is to keep an eye on the forex trading market, and watch what other people are doing. There are several methods that can be brought into play when deciding on your strategy.
- Fundamental analysis - currencies are traded in a market, and therefore you can analyse supply and demand. There are many factors that affect the market such as a countries economic growth, its interest rates,employment figures, politics and inflation.Watching these factors is called fundamental analysis.
- Technical analysis - alternatively you can watch the price charts. If you learn how to read them, these charts can indicate trends and price points. This will help indicate when to enter or leave the market.
- Money management - this is a vital part of trading and making best use of your forex trading account. It is important with any forex trading system to be able to measure risk and rewards, judge the size of your trade and when to buy and sell particular currencies.
THE HISTORY OF FOREX TRADING PLATFORMS
The first forex trading platforms online were seen in 1996. With the availability of these, foreign exchange and its consumer market prospered. It became easy and quick for customers to access the market and make trades from their own front room. Initially, the forex trading platforms were very basic. But their development was rapid and gave rise to the increasing number of forex market traders today.
WHAT FOREX TRADING PLATFORMS ARE AVAILABLE?
There are a wide variety of forex trading platforms available for your forex trading convenience. When you decide to start trading and have chosen a forex trading account, the broker you have picked will be able to offer a way for you to do your trading business that is easy, convenient and simple to use. Depending on what electronic device you have access to they will offer you the appropriate forex trading software. The best forex trading broker will assist you with demonstrations, tutorials and tips for its use.
- PC/WEB - the best forex trading platform for use at home. Download the forex trading software onto your pc or laptop and start forex trading online right away.In our XM review we show a perfect example of PC based forex broker
- MOBILE - allow yourself the flexibility to trade wherever you are, with the best forex trading platform for your mobile device. In this Instaforex detailed review we explain all the benefits when trading on the go with one of the top forex brokers.
- TABLET - apps are available for you to trade using your android device or tablet. You can choose the forex trading platforms most appropriate for you.
Choosing the best forex trading platform for your needs has never been easier. Which ever forex trading software you install on your device, you will be able to customise it as you wish. The best forex trading platform will let you view quotes, interactive charts, trading history, technical indicators and a whole lot more.
WHAT HELP IS AVAILABLE WHEN YOU START FOREX TRADING FOR REAL?
You should choose to adopt a forex trading system. When you are choosing the best forex trading platform, you also need to think about a forex trading system. A wealth of information is available for you both online and in print form. The best trading forex system probably falls into one of these groups: basic, simple, complex and advanced. Each forex trading system you read about will have its own advantages and disadvantages and require a varying level of knowledge. For the best forex trading experience you will need to do your own research.
By using a forex trading system, you are taking advantage of experienced knowledge, made available to you by the best forex trading professionals. Some of the systems are available to you for free and some will come at a price. It is really up to you which road you take.
WHAT IS FOREX TRADING - A HISTORY LESSON
We thought you all might appreciate a little history lesson, to add to the forex trading experience. When contemplating joining the best forex trading market, an understanding of how it all began may further fuel your enthusiasm to participate.
Todays modern foreign exchange market has its roots in 1973. Money, however, has been around for far longer than this. It is considered that the Babylonians were the first to use a form of paper money, although money has been around in some form or another since the Pharaohs. The first money changers were around in the middle ages and they began by exchanging coins from different cultures. The need for another form of currency developed in the middle ages and paper bills were introduced.
From the middle ages until World War I everything remained pretty constant and not much speculation took place. Volatility and speculation in the forex market began after World War I, but was not looked upon very favourably by the general public and businesses. The gold standard was removed in 1931, which helped to introduce a serious easing off in the activity of the forex market. A number of changes took place after 1931, bringing the forex market to the position it holds today.
THE BRETTON WOODS ACCORD
The Bretton Woods Accord happened near the end of World War II. Bretton Woods, New Hampshire in the United States, was the place where the United Nations Monetary and Financial Conference was held. It was held in the US because it was considered relatively unharmed by the Second World War, whereas the major European countries were in disarray. Great Britain, France and the United States had delegates at this conference. Until the Second World War most currencies were valued against the British pound. The Nazis undertook a campaign of counterfeiting the pound and this, together with the stock market crash in 1929, somersaulted the US dollar into the position of a benchmark currency. Most international currencies were now compared with the US dollar.
The Bretton Wood Accord set up the pegging of different currencies and the International Monetary Fund, hoping to steady the economic situation in the world. Currencies were allowed to deviate by 1% either side of the standard. If a currency became perilously close to this limit the respective country's Central Bank would become involved and bring the exchange rate back in the accepted range. Bear in mind that the US dollar was also pegged to the price of gold. This brought further stability to the world currencies and the forex market.
The Bretton Woods Accord ultimately failed in 1971, but it was able to bring stability to Japan as well as Europe.
Next was the turn of the Smithsonian Agreement in 1971. It was introduced to allow greater variation in the value of currencies. Europe tried to move away from the dollar in 1972. Luxembourg, Belgium, the Netherlands, Italy, France and West Germany got together to create the European Joint Float. These two agreements failed in 1973 and the market became free-floating. No new agreements had been devised, so this happened purely because there was no other alternative. The free-floating system was officially mandated in 1978. Governments were now free to either peg, semi-peg or free float their own currencies.
To try and gain more independence from the US dollar, Europe devised the European Monetary System in 1978. This was abandoned in 1993.
Todays modern currencies all move independently of one another. Anyone can trade in them, therefore the best forex trading can be of benefit to all who wish to participate. Occasionally, Central Banks become involved and try to move a currency back to a desired level, but on the whole supply and demand is the most important factor.
SOME INTERESTING FOREX FACTS AND FIGURES
- Forex trading between April 2007 and 2010 increased by 20%
- Forex trading, since 2004, has more than doubled
- London is the largest centre for trading in foreign currencies
- London’s forex trading turnover was 36.7% of the global forex trading figures in 2010
- The London market price is usually a currency's quoted price
- The most widely traded currency is the US dollar, the Euro is next, then the Japanese yen, the British pound and the Swiss franc
- Banks and other financial companies are the largest traders in the forex marketplace
- The most popular pair of currencies is the EUR/USD
- Trading figures of the forex market are 4 times larger than the world GDP
DIFFERENT MARKET PLAYERS
- Commercial companies - these companies are often using foreign exchange transactions to pay for goods or services. Trade is often in small amounts, and there is very little impact, in the short term, on the rates of the market.
- Central banks - these play an important role. They attempt to control interest rates, rates of inflation and the supply of money. They often have targets for the value of their currency, be they official or unofficial. They have substantial reserves of foreign currencies which can be used to affect the market.
- National banks of a country - the national bank of every country fixes its own daily monetary exchange rate. These fixed rates are used as an indicator of trends by other banks, traders and dealers.
- Hedge funds - since 1996 hedge funds have gained a reputation for being aggressive currency speculators. The majority of forex trading transactions are speculation. There is no real intention to receive the currency bought. Billions of equity dollars are controlled by hedge fund companies and their speculating power is enormous.
- Investment management companies - these companies often manage pension funds and endowments for companies. They use the foreign exchange market to assist the progress of foreign currency transactions.
- Retail foreign exchange traders - typically these are brokers and dealers. Brokers serve their customers, and try to obtain the best price for their clients.The spread is used to cover their costs. Dealers, on the other hand, do not act on behalf of a customer.
- Foreign exchange companies - you see many of these on your high street, or when on holiday abroad. They do not trade as such, but offer a currency exchange for payment.
- Money transfer/ remittance companies - the best known of these is Western Union. They offer the transfer of money to another country.
When embarking on a forex trading market career it is important to get all the right advice. Choosing the right forex trading platforms, software, systems and strategies can only be successfully undertaken with the help of a knowledgeable, professional and trustworthy forex broker. Take advantage of what they can offer you in the form of a forex bonus, free demos and tutorials, trading platform and accompanying software.