How To Get Started In Forex

Basically, Forex, or currency market or foreign exchange market

, is a market wherein one currency is traded for another. Additionally, Forex is one of the largest markets in the world. The goal of some participants in the Forex market is to seek an exchange of a foreign currency for their own. A large part of the market is made up of currency traders, who speculate movements in the exchange rates, similar to others who speculate movements of stock prices.

Learning Forex

The investments placed on Forex markets normally deal with the four major pairs, namely EUR/USD, USD/JPY, GBP/USD, and the USD/CHF. These pairs are also considered as blue chips.

Additionally, the foreign exchange market is unique due to several aspects, such as: the trading volumes, extreme market liquidity, the large amount and variety of traders, geographical dispersion, 24-hour trading, the factors affecting the exchange rates, and the low margins of profit with other fixed income markets.

The exchange-traded foreign exchange future contracts were first introduced in the year 1972 at the Chicago Mercantile Exchange. Future volumes of Forex have grown rapidly in recent years, and accounts for about seven percent of the total Forex market volume.

From Stocks to Forex

Most traders in the United States are involved in stock trading. Within that environment, a trader who is following a trend for as long as possible would not have any difficulty in making money. The stock market is also a very forgiving market, which would bail out even poor traders. The only trick is to understand the difference between the good and the lucky. There are several talented traders who can falter when the conditions of trading become less then ideal.

Although both the stock and Forex markets involve risks, the latter is not conducted on a regulated exchange, thus there are additional risks correlated with Forex trading. However, traders previously involved in stock markets are transferring to Forex markets due to a number of benefits.

One is the greater leverage. Forex trading provides greater leverage compared to the traditional stock trading, which only allows traders to be in charge of larger positions with smaller amounts of capital. Greater leverage allows an individual to trade the same size positions that he or she might take with a stock broker, while leaving him or her with more available capital to trade more markets.

In Forex markets, there are no middlemen. When trading directly in Forex markets, the only players are the dealer and the primary market maker, or the trader and the buyer or seller of the currency pair; no extra parties are involved. On the other hand, the stock market involves the trader, broker and the exchange, who both charge commissions and fees.

by: Nicole Morgan

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