Here are some brief pointers on the foreign exchange markets.
Currency trading is the backbone of international finance, and it is the act of simultaneously buying or selling one currency with another. Many of the world's currencies are traded on exchanges from Hong Kong to New York, 24 hours a day, five days a week. Currencies are traded on a floating exchange rate in pairs, such as Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY).
Currency trading has many market names. It is known as the foreign exchange market, the "Forex" or "FX" market and is the largest financial market in the world, with average daily turnover of around USD2 trillion.
You may have read that before, but what does so much liquidity (money) in the market mean for you as a currency trader?
With such a huge amount of money being traded everyday, there is always a buyer for someone selling - unlike almost any other market in the world. Also, the market prices change hundreds, sometimes thousands of times each day. This fluctuation in prices means that there are thousands of potential opportunities for profits or losses to be made, everyday.
As a truly 24-hour marketplace, you can buy and sell the currency pairs you want, when you want, regardless of where you are in the world. Unlike most traditional markets, as well as gambling sites, forex offers you more freedom to speculatively trade how and when you want to.
Since currencies are traded worldwide, the market operates 24 hours a day from Sunday evening to Friday evening. This means that you can basically choose when you wish to trade - you don't have to wait for an exchange to open. The buyers and sellers are there waiting to do business.
A currency trade involves selling or buying one currency with another.
You can make or lose money just as easily in falling markets as in rising ones. This is because you can both buy a currency, EUR/USD for example, or you can sell it.
Although this may sound strange, you can sell a currency that you don't actually own yet. This is because to balance the accounts, you will have to buy it back later.
Currencies can be traded online anywhere in the world from a laptop, a standard PC, an internet café or anywhere there's an internet connection.
The backbone of the currency trading market still consists of a global network of dealers (mainly major commercial banks) that communicate and trade with one another and with their clients through electronic networks and telephones. There are no exchanges to serve as central locations for facilitating transactions the way stock exchanges serve the equity markets.
No one can corner this market. The online currency trading market is so vast and has so many participants that no single entity, not even a central bank, can control the market price for an extended period of time. Even interventions by mighty central banks, as well as large market orders, are becoming increasingly ineffectual and short-lived, and thus central banks are becoming less and less inclined to try to intervene in order to manipulate market prices.
This means that the currency markets are truly independent - no one institution has control over the direction of the market. It's the purest form of trading there is - it's just you against the market.
More than 85% of all transactions involve trading the major currency pairs (also known as the Majors) which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.
Contrary to popular belief, the unification of many European currencies into one single currency (the Euro) has only strengthened and further popularised the use of currencies as investments, hedging instruments, and as tools for speculative investment. The most marked developments have been the democratisation of foreign exchange in the retail market and the dramatic improvement of trading conditions for small traders.
A variety of economic and political conditions affect currency prices, but probably the most important ones are interest rates, inflation, and political stability. Sometimes governments actually participate in the market, either by flooding the market with their domestic currencies in an attempt to lower their prices, or, conversely, by buying in order to raise their domestic prices.
In the stock market it is almost impossible to know which shares you should monitor. There are thousands of corporations, so how on earth do you sift through all of them to find one or two great stocks to trade? The currency market is excellent in this sense, as there are only a handful of different currencies to keep your eye on, and generally you only need to monitor two or three at any given time. This makes currency trading more simple than almost any other form of speculative investment.
Pip Forex is owned by Simray ASA, a company regulated by Norwegian law.
Risk Warning:
Forex trading (also known as foreign exchange or currency trading) contains risk. However, your risk is strictly limited to how much you have in your account. As a rule, you should only trade forex with money that you can afford to live without. Some people will be successful in their forex trading and some will not. So, you should consider your trading options and your budget before you start trading.
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