FOREX stands for Foreign currency and it stems from the international financial market. That is, the Forex market, the place where currencies of different countries are bought and sold in a similar manner to the buying as well as selling of share market within the ASX, Australian Stock Exchange.
Forex market started in the 1970?s and that is when floating of currencies and free exchange rates began. Like share prices, it is the people who traded in the Forex market that affects the costs of the currencies traded relating to the law of supply and demand. Hence, if the market force dictates, e. g. if the US Federal Reserve decides to boost interest rates to curb inflation while Australia Reserve Bank possess the interest rate on hold, that should stimulate a big change in exchange rate. One should therefore see rate of interest effect with the US $ worth more in value than AUD at these times.
The amount of money traded daily within the Forex market is uniquely enormous. The rate of trade makes Forex the single most liquid financial marketplace with currency traded amounting from 1 to 1. 5 trillion US dollars daily. Owing to this scale, it is not possible for the Forex market to be manipulated externally. Hence, no single trader as well as any financial institution trading in it has the wealth to influence the price of any currency in it?s favour.
The Forex is so fluid and so much exchange at such a fast pace that it is just impossible for anyone to affect the market of anyone major currency. The sheer liquidity from the Forex market with so many exchange taking place, enable the traders in order to open and close placement within seconds. This is because there are always willing buyers and sellers offered at any one time since the collective exchange of the different world Forex centers is considered open for 24 hours as it spans across different time zone.
Forex is naturally unique compared to the stock market which is normally associated with long phrase investments. In currency trade, a minute change in prices of a currency generate situation that permits investors to apply a variety of strategies to their advantage. However, there are also long-term hedge investors involved in Forex as well as short term investors that take advantage of credit lines to look for large gains over a short period.
HOW FOREX WORKS
Unlike NYSE (New york Stock Exchange) or even ASX (Australian Stock market), there is no main marketplace for Forex. Instead the exchange takes place over the counter 5 days a week on the 24 hour basis, via satellite, among major financial centers in London, Paris, Tokyo, New York, Sydney, Hong Kong, Frankfurt, Singapore and Zurich. Dealers, including online ones, around the globe are always open to quote any major currency.
MARGINAL TRADING
Marginal trading is like using a credit card and it is such as borrowing money to industry currency. This encourages investors to consider additional risk by opening a bigger trading position with less out-of-the pocket money and relying more on borrowed capital that is provided by the brokering company.
Marginal trading in the Forex market is traded in several which 1 lot is about 100, 000 of unit foreign currency. The margin requires to hold that $100, 000 position is 1. 0% of $100, 000 and that is the same as a personal capital outlay of $1000 (i. e. taken from 100, 000 x 0. 01) while the balance of $99, 000 is covered by the broker.
If the currency exchanged increases in value you make the difference whenever you close your trading placement. You capital outlay and profit gained minus any transaction cost from the trade are credited in to your margin account.
INVESTMENT STRATEGIES: TECHNICAL & FUNDAMENTAL ANALYSIS
Of course, one cannot just trade without any knowledge of the foreign currency market. To be successful within Forex trading one has to be analytical and this is what all experts do. They do what all of us call Technical and Fundamental Analysis.
Technical analysis is related to studying data gathered on all the fluctuations of the various currency prices over time. From the data, chart patterns are formed and movement from the currency prices can be observed for trading decisions to be made.
The behaviour patterns of each currency prices are the actual reflection of all factors in the market place such as an event, overbought and oversold situation, interest rates, etc. Most of these designs in chart forms are instantly supplied by the brokerage firm a person trade from.
Fundamental analysis is an event based analysis like politics situation, rumours, economy, interest rate setting through central or reserve bank from the country concern, news on tax policy, GDP, country?s economic performance, political unrest, natural disaster, employment or unemployment figure announcement, etc. Value of a currency can also be influenced by expectation, anticipations and perceptions from the participants in Forex buying and selling, i. e. it could be driven by sentiment of these Forex participants.
MAKE MONEY WITH CURRENCY ON FOREX
To profit out of Forext tading one require sheer diligence and trading experience and getting familiar with Technical and Fundamental analysis to put once trade. Anyone who participates in it should have equal opportunity since it is one market that?s so liquid and rapid moving that it is impossible to be affected by anyone person or even fund management.
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