Candlestick Trading Blog
December 31, 2007
Forex Currency Trading
What is Forex Currency Trading? Forex currency trading is short for “foreign exchange” so trading the forex markets is simply trading foreign currency. The Forex or Foreign Exchange market is the world’s largest financial market, in which the currency of one country is exchanged with another country through a currency exchange rate system. The purpose of successful forex traders is to obtain profit as a result of purchase and sale when foreign currency trading. Through the development of technology forex currency trading is no longer reserved only for the large banking and institutional firms, but is now available to the individual forex investor on a variety of trading platforms. The goal of forex currency trading is to hold a currency that appreciates in value in relation to the other currencies. Forex currency trading is open for trades 24 hours a day and is dominated by four currency pairs. Those include the Euro vs. the U.S. Dollar, the U.S. dollar vs. the Japanese Yen, the U.S. Dollar vs. the Swiss Frand, and the U.S. Dollar vs. the British Pound. Forex currency trading is different from other markets such as stock trading, futures trading, or options trading, because it does not take place on a regulated exchange. When trading forex all members trade with each other based on credit agreements. It is purely speculative and there is no physical exchange of currencies. All profits or losses are calculated in dollars, depending on the market price, and are recorded on the trader’s account as computer entries. In forex currency trading there are not limits on the size of your position and there is no such thing as insider trading. In fact, some economic date is actually leaked on days before it is officially released! With internet trading, came the advent of the forex currency broker. When trading stocks, online discount brokers are often paid a commission in return for executing the trade per the customer’s instructions. Brokers, that conduct forex currency trading, actually do not obtain a commission but rather obtain their money through the bid-ask spread. They actually act more as dealers because they assume market risk by serving as a counter part to the investor’s trade. When conducting forex currency trading there are various terms that you should be familiar with. Greenback, and buck are a couple of terms. These are nicknames for the U.S. dollar used to trade currency. Aussie is the nickname for the Australian dollar, and Kiwi is the nickname for the There are also certain things to avoid when forex currency trading. You should avoid strict margin rules because your broker can buy or sell at their discretion. This is a bad thing for you because some brokers will liquidate your position on a margin call that is low even if you have enough cash to cover it. When conducting forex currency trading you should also avoid hunting or sniping. This is the premature buying or selling near preset points. If a broker resorts to a forex trading strategy of this nature, this is very bad news for you. These acts are shady and no broker will ever admit to doing them. Online currency trading requires that you talk to other forex investors and that you also visit online discussion forums for recommendations of honest brokers. While it is easier to conduct forex currency trading due to the internet it is still a very complicated and complex market. Be sure to study hard and learn forex trading before investing your money. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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