The word "forex" is a contraction of the words "foreign exchange"; it is sometimes abbreviated further, and simply called "FX". Forex provides opportunities for speculation, and that is likely what stimulated your curiosity.
Forex is simply the trading of currencies. In its broadest sense, forex includes all commercial and speculative buying and selling of all the world's currencies, making it the largest market in the world. In a forex trade, one currency is purchased while another currency is simultaneously sold; in other words, one currency is exchanged for the one being bought. The term forex properly refers to all currency trading done anywhere in the world; however, in practice, and in the context of this website, the word is often used to refer specifically to the trading of currencies by speculators.
Forex speculation involves risk, and inherent in risk is potential profit; the more at risk, the more potential profit. The forex market is huge: Due to this size and global scope, prices can be observed and traded, but not easily manipulated. Forex rates can be affected by events in your backyard or anywhere in the world. When such events affect the value of a currency, the currency value can often tend to trend in a particular direction for a period of time.
Analysis of historical forex market action in light of current market conditions known as technical analysis , possibly combined with consideration of global events and markets fundamental analysis can help the forex speculator gain insight into currency markets that might allow the trader to project future price movements. However, such insight and potential success in forex speculation requires experience, commitment, discipline and a perhaps a special type of intelligence, and will come only at an investment in time, experience and financial loss.
Particularly for private speculators, forex trading occurs online. Most private forex traders participate from home or office, over their Internet-connected desktop or laptop computers. In fact, the Internet helps explain the dramatic growth of foreign currency speculation. Individual traders, perhaps just like you, all over the world can participate in this online market. Traditionally, futures and equities trading only occurred in established exchanges, where parties can meet and agree to a trade.
Over time, these exchanges have become subject to stringent regulations to monitor and moderate activity. Forex is termed "off-exchange trading", or "OTC" over-the-counter as each party deals directly with each other, where ever they may be. With this freedom comes some risk, As well, it is subject to very limited regulations. Until the 's, and for the previous years, the value of most currencies was tied in some way to the value of gold.
In this "gold standard" was replaced by the Bretton Woods Agreement which valued the United States dollar against gold, and all other currencies against the US dollar. In that agreement fell apart and a system of floating exchange rates was widely adopted, leading to fluctuations in currency values in an open market-and laying the foundation for foreign exchange speculation. Today, trading in foreign currencies by speculators usually takes place through a forex broker or dealer, who provides the trading platform to transact forex trades.
Note that two currencies are always involved in a forex trade, with one being purchased while the other is being sold. The forex trader will generally hold the purchased currency called a position for a period of time, intending to profit when the prices of the two currencies change favorably.
The transaction is completed, or the position is closed, when the opposite currency is bought and the other sold. Profit is calculated by the difference in the buying and selling price. Different brokers offer different services, and traders need to be careful their broker is serving their best interests. Each broker provides demonstration or practice accounts, where a new trader can play with virtual money until they feel comfortable opening a real account.
Analysis can be completed and orders are placed online, at the trader's request. The profit potential is why participants enter the market. But why would a speculator choose to trade forex instead of equities or futures? Forex offers several advantages over speculative trading in futures, stocks and other equities.
Eight major currency pairs dominate most currency trading, so it is a much simpler market to follow for most traders. Although most currency speculation occurs between a relatively small number of currencies, many brokerages offer trading in a much wider range of less commonly-traded currencies. Some prospective traders looking to participate in speculation are attracted by the low account balances required to open a forex account with some brokerages.
Please read on through the remaining topics of this forex education section to learn more. What is Forex In its broad sense, forex includes speculation and Why Trade Forex Forex markets offer unique trading opportunties Forex Trading Basics Currency pairs, hours, leverage.
What is a pip? Getting Started in Forex Trading As with any new venture, a reasoned approach to Charts and Quotes Understand these vital tools in the trader's kit Mechanics of Forex Trading Entering and exiting forex trades are an essential Interest and Carry Trade in Forex How interest impacts forex trading. Fundamental and Technical Analysis Which approach is right for the forex trader? Opening a Forex Account What to look for in a forex broker, and how to Risk Management This can be the difference between success and Introduction The word "forex" is a contraction of the words "foreign exchange"; it is sometimes abbreviated further, and simply called "FX".
Where Does Forex Trade? How Does the Forex Market Work? After all, three interest rate hikes from the U. Dow at Record Highs: Permission is not granted to redistribute charts, data, news or other information found on this site, in any manner. Although it is believed that information provided is accurate, TradingCharts will not accept liability for any loss or damage that may arise from use of the content, inability to access the website, or delay or failure of receive of any information provided through this site.
Learn Forex - Online course for new traders Introduction The word "forex" is a contraction of the words "foreign exchange"; it is sometimes abbreviated further, and simply called "FX". Central Bank of Iraq. Federal Deposit Insurance Corporation.
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