Forex Trading, What's it All About?

Forex Trading is the act of trading currencies from different countries against each other. Forex is acronym of Foreign Exchange

For example, in Europe the currency in circulation is called the Euro (EUR) and in the United States the currency in circulation is called the US Dollar (USD). An example of a forex trade is to buy the Euro while simultaneously selling US Dollar. This is called going long on the EUR/USD

Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business. If you are living in the U.S. and want to buy cheese from France, either you or the company that you buy the cheese from has to pay the French for the cheese in euros (EUR).

"Foreign Exchange" refers to money denominated in the currency of another nation or group of nations. Any person who exchanges money denominated in one nation's currency for money denominated in another nation's currency is conducting foreign exchange

The Forex (short for Foreign Exchange) market is the 24 hour cash market where currencies are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based on currency movements.

"Forex Trading" is the common name given to the foreign exchange, or for.ex, market. Forex trading has become one of the fastest-growing forms of investment.

Let us assume that at present 1 USD = .71585 EURO (1 EUR = 1.39694 USD) and a trader has $100,000. He decides to buy EUR at the current price and ends up getting 71,585 EURO. After a few days, the euro appreciates and the new exchange rate is 1 EUR = 1.40101 USD. The trader sells his EURO for USD and in turn makes a profit. This is because on selling EUROs, he gets $100,291.30085; whereas, he started off with $100,000. In other words, in a span of a few days the trader earns $291.30085, which is approximately a return of .29% on his investment. Since 1 pip = .0001 (for EUR/USD pair), the trader made 29 pips.

Unlike other financial markets, the forex market has no physical location or central exchange. It is an over-the-counter market where buyers and sellers including banks, corporations, and private investors conduct business.

If you want to become a Forex trader, you will probably be aware that most traders lose but the good news is Forex trading is a totally learned skill.

I will continue to post helpful hubs and tips in the coming
days.