Forex Market Trading – Understanding the Forex Market
Forex market trading is a derivative of the foreign exchange. The foreign exchange market now known as the forex market or fx has not been around for many years. It originated in the early 1970’s when the United States stopped using the gold standard. When the gold standard was no longer in use the other currencies went out of control. Prices began to fluctuate with out any forms of control. When this occurred banks again took the opportunity to buy currency low and the later sell it high. This was the creation of the Forex Market. [ad code = 3]
In Todays Forex Market there is over $2 trillion in transactions that occur each and every twent-four hour period. The global forex market operates, Monday through Friday. World wide time zone fluctuations allow for this 24 hour market to operate. The most heavily traded currencies in forex market trading revolves around the U.S. Dollar,Japanese yen, the Euro, British pound, Austrailian dollar and the Swiss franc.
Only 2 percent of the forex market is traded and controlled by individuals. The Forex market is primarily controlled by government banks, international banks, corporations, investment banks and hedge funds. However, 2 percent of two trillion dollars represents a very large amount of money controlled by individual traders.
When participating in market trading it is always traded in pairs. First you purchase one currency and than you sell the other. Simple concept however, difficult to master. You must first excercise your trade when you that currency you’re buying is going to rise in value in comparison to the currency you are going to sell. If you’re trade was profitable then you would perform another trade the opposite way. You would sell the currency you bought first and buy the currency you sold.
So for example lets say that the market offers a pair of currencies like : USD/YEN 1.2200. This would equate to a purchase price of one american dollar is 1.22 Yen. If an investor forecasted that the market would change and that the Yen was going to increase in value and be more than the USD, you might sell let’s say 100,000 USD, and buy 100,000 YEN, and then hold your position. So in two or three weeks the rate of exchange changes so that the currencies show this figure: YEN/USD 1.3100. This means that the YEN is now worth 1.31 dollars, which would equate to a profit of 0.11 per unit.
The foreign exchange market is a much more challenging market, and requires many hours of study each day. It is inhabited mostly by large organizations and huge institutions that take their Forex Investment seriously. Dont be scared to jump in however and be one of the 2% of individuals that control the Forex Market.