Forex trading is derived from the combination of two words, foreign and foreign exchange. In simpler terms, it is the buying and selling of foreign currencies and is often referred to as the FX market. If you are looking for excitement and profit, this could be the market to trade in.
Forex trading has become extremely popular worldwide, enabling people from all different countries and backgrounds to trade as only professional traders were able to do not long ago. Until recently, Forex trading was mostly carried out by big banks and large institutional traders. Recent technological advancements have turned Forex into the playground of average traders like you and me.
It is easy to find an online FX trading system, platform, or software that can make trading the market easy and fun. Just browse the web and you will come across many exciting offers and promotions. Many firms sell or even give away free educational software, charts, or other useful tools for your future in Forex trading.
Currency trading is done in pairs or combinations. For example, trading the Yen against the Dollar, the Dollar against the Euro, or the British Pound against the dollar. The most popular currencies used for trading and investment purposes are the US Dollar (USD), Japanese Yen, British Pound Sterling, Euro, and Swiss francs. They make up the bulk of all currency trading.
When you come across these currencies on the market, you will see them written as a pair: USD/JPY (US Dollar and Japanese Yen), EUR/USD (Euro and US Dollar), USD/CHF (US Dollar and Swiss Franc) and GBP/USD (Pound Sterling and US Dollar).
The vast majority of all-day currency trades involve these five major currencies. Your goal as a trader is to determine which currency will appreciate against the other. If you can find or develop a system that will allow you to choose the right direction a currency will take, it is possible to make good profits in the FX market.
Most of the trading in the FX market is done by Forex brokers and dealers in major banking institutions around the world. And since it is a worldwide market, this makes it a 24 hours a day market. Brokers or dealers work in different shifts so that large institutional traders can execute their trades 24 hours a day.
However, do not panic. You don’t need to be awake all day and all night to trade the market. It’s a simple matter of placing stop orders with brokers to buy or sell at predetermined price levels even while you sleep. If your predetermined price points are met, the order will be executed as planned.
If your price points are not met, orders will not be placed or executed. This is the key to stopping potentially huge losses. You would hate to be asleep without a way to get out when the market turns against you. Having specific price levels can save you a lot of stress in the marketplace. With stop orders, you don’t have to constantly monitor your currencies every second of the day. You can place your orders and then go about your normal daily routine.
FX is different from stock markets because stock markets can be very volatile. The FX market is normally much smoother and doesn’t turn up and down as fast or as quickly. Trading on the market is very easy and very liquid, meaning you can get your money in or out at any time. Placing an order can be done in a matter of seconds. If you have the temperament for this kind of activity, it can be a very worthwhile endeavor.