If you look closely at the term ‘forex' you will see it comprise of two abbreviated words, ‘foreign' and ‘exchange'. It describes a market system under which one country's currency is exchanged in trade for another country's currency. For example the $USD may be traded for the £GBP meaning that you would buy up quantities of US dollars with the stronger UK Sterling as at present time.

You buy in anticipation of your US dollar holding rising in value in the near future so as to turn a profit for you when you sell your dollars. In this scenario you are effectively trading in the foreign currency market.

The Forex market is open to trade by private individuals through the medium of a broker. It is the largest financial market in the world, much larger than the stock market, and trades over $US 3 Trillion globally on a daily basis. Except for weekends the Forex market trades every day 24/7 due to differences in the time zones for different countries where as one market close another opens in another country.

The major players in the Forex market starting with the top tier down are banks, commercial companies, central banks, hedge funds,investment management firms, retail forex brokers and non-bank foreign exchange companies known as foreign exchange brokers.

There is no central market clearing system but rather a number of inter-connected markets due to the nature of the over-the-counter (OTC) transactions. The main trading centres are London, New York and Tokyo, Hong-Kong and Singapore. Each trading currency is denoted by three letters, for example the US dollar is denoted by USD, the British Sterling GBP, the Japanese Yen is JPY etc. This makes for certainty as to which currency you are dealing with.

When currencies are traded this must be done in pairs only which are referred to as products. So, for instance if the British Pound Sterling is being traded against the US dollar this would be expressed as GBP/USD where the GBP is referred to as the base currency meaning it is the stronger of the two currencies. The weaker currency is known as the counter currency.

In order to conduct any type of legitimate trade in the foreign currency market as an individual you must go through a foreign exchange broker described above. For effective trading you will need to be aware of factors affecting currency trading. These elements are outside the scope of this article but they include economic and political factors and market psychology. In turn these factors influence the supply and demand for individual countries currencies.

The foreign currency market cannot therefore be influenced by ‘insider trading' as is the case with the stock market. The foreign currency market is therefore one of the best barometer of the state of individual countries. An individual therefore has as much chance as the banks for making profits (or losses) in the Forex market. The only advantage the banks have for making money in the foreign currency market over an individual apart from relative volumes of cash, is access to their clients ‘order flow' or buying trends.

The foreign currency market can become a wealth builder for the individual. The Forex market is growing exponentially building wealth for the banks, governments and large institutions. There are more opportunities now for individuals to trade and become a part of this wealth producing force due to the explosion of the internet. There are many games and software simulations online that an individual has now has access to which increases his education and skill levels in dealing in foreign currency trading.

To get started in learning about forex trading, you will need to locate the forex trading software, education-learning system you want to use. As you find the games,as they are called, you will enter information about yourself, about what you are interested in learning and then you will download software to your computer. In following the 'game', you will learn how to make profits or what it is like to lose money in the forex market. This type of game is going to make you more aware of what happens on a daily basis, how the markets open and close, and how different the various countries currencies really are.

You will open an online 'account' using the gaming system. You will then be able to read the news, find and compare markets, and you will be able to make 'fake' trades so you can watch your money build or be eaten away in losses. As you learn the system,using it a few times a week, you are going to be more prepared, more educated and you will be ready to use the forex trades for real to make money. Of course, you may still need the aid of broker or a company to make your transactions happen but you will better understand the process, what will happen, and what calls you may want to make when you read about the news, the markets,and the currencies in other countries.

The Author

Matrix Jones