An Introduction to the Forex Market

by Ivan Strashimirov Forex Trader

More and more people are learning of the great opportunities in forex trade. As a result, the number of people striving to secure a position in this niche has increased. Nonetheless, as much as this is a lucrative position, it is paramount to understand that not every person succeeds. The best that you can do, prior to making your investment, is to understand what the forex market is all about. A good way to start is to learn what is Forex itself and how it functions.

Forex basically stands for foreign exchange. Often, this is abbreviated as Fx. Just as the name signifies, the trade involves the trade of currency. The trader buys and sells currencies concurrently. For the trade to take place, you need to buy new currency with a different currency. The trade is simply an over the counter market.

Considering the fact that you have to buy a new currency using the one at hand, the forex market involves currency pairs. The pair can be Euro versus US Dollar or the Japanese Yen versus the US dollar and so on. The transactions are done via an electronic network or by phone.

Who trades?

Before turning to the option in the forex market, it is paramount to understand the people who trade and why they do it. This will help determine whether the trade is right for you or not. There are primarily two sources in daily turnover; foreign trade and speculation.

Foreign trade is where companies or investors purchase products from foreign countries and bring them to their domestic country. Alternatively, the trade can be initiated where profits are converted into domestic currency. In the forex market, the foreign trade contributes to 5%. The other 95% comes from profit speculations.

How to succeed

As a trader in the forex market, it is paramount that you concentrate on the biggest currency pairs in your reach. The more liquid a pair is, the better your chances of making good money. The major currencies are the Japanese Yen, US Dollar, Euro, Swiss Franc, British Pound, Canadian Dollar and the Australian Dollar. You must conduct your research on the most lucrative pair to succeed in the forex market.

Today, the forex market is the most traded in the world. It gets an average turnaround of about 4 trillion US Dollars. The round the clock true trade starts on Sunday in Sydney and progresses to Tokyo, London and finally to New York. The best thing about this market is that investors can respond instantly to any currency fluctuation.

A continuous market research is paramount if you trade in the forex market. It is by keeping up with the ever changing trends that you will be able to maintain an upper hand. The Internet is pretty resourceful when it comes to research.