The foreign exchange market is a loosely tied worldwide market which facilitates currency trading. The main aim is to aid businesses with international trade, for which currency conversions are required. The FX market is vastly different from trading stocks. For one thing, it is a single global market which operates round the clock on weekdays. This makes it the single biggest financial market in the world with a $3.2 trillion daily volume.
Unlike share markets which have a physical address and a controlling organization, the forex market is just a collection of traders irrespective of geographic location. Financial institutions set the currency exchange rates to facilitate international business. These rates are then used by forex traders for speculation. Volume aside, the choices are relatively meager on the forex trading market as compared to the thousands of companies whose shares are on offer in the stock markets.
Another key difference that forex traders face is the lack of brokers working on commission. Instead, FX firms that take orders from traders get paid based on an ask-bid spread. The number of pips on a forex trading spread depends on the popularity of the currency pair involved.
A brief overview of the basics might be helpful at this point, such as knowing that currency trading is done in pairs. In the forex market, there is no absolute and all currency values are all relative to each other. So forex pairs are formed and a trader takes a position based on the relative value ratio of one of these pairs, such as GBP/USD, EUR/USD, EUR/JPY and USD/JPY.
Pips (acronym for percentage in point) are the incremental units that calculations are based on in the FX world. Pips can have a value as low as four decimal points, as in a lowest possible value of 0.0001. Since these increments are really tiny, the volumes involved in each forex trade have to significantly large enough for the trader to make a decent profit.
Among the many choices available as a means of placing trades, the one that is most frequently used is a carry trade. A trader will borrow currency with a low interest rate and use it finance purchase of high yield currencies. It's easy and simple, and doesn't need much of a financial background to execute a forex trade. It would, however, be advisable to look up things like stop loss orders.
That's mostly because trading on the forex market involves leveraging and dazzlingly sums of money. All it needs is to open an account with a minimum balance, and it is then possible to engage in leveraged trades worth huge sums (tens of thousands in dollar value).
It's necessary to be very careful because there's a very low threshold for entry into the forex trading market. New traders can get started without any significant investments in tools or training or registration. To become an online forex trader, all that is really required is a computer with online connectivity and knowing how to use trading platforms. This last one is a skill that can easily be picked up by using a forex demo account before getting down to business for real.
Unlike share markets which have a physical address and a controlling organization, the forex market is just a collection of traders irrespective of geographic location. Financial institutions set the currency exchange rates to facilitate international business. These rates are then used by forex traders for speculation. Volume aside, the choices are relatively meager on the forex trading market as compared to the thousands of companies whose shares are on offer in the stock markets.
Another key difference that forex traders face is the lack of brokers working on commission. Instead, FX firms that take orders from traders get paid based on an ask-bid spread. The number of pips on a forex trading spread depends on the popularity of the currency pair involved.
A brief overview of the basics might be helpful at this point, such as knowing that currency trading is done in pairs. In the forex market, there is no absolute and all currency values are all relative to each other. So forex pairs are formed and a trader takes a position based on the relative value ratio of one of these pairs, such as GBP/USD, EUR/USD, EUR/JPY and USD/JPY.
Pips (acronym for percentage in point) are the incremental units that calculations are based on in the FX world. Pips can have a value as low as four decimal points, as in a lowest possible value of 0.0001. Since these increments are really tiny, the volumes involved in each forex trade have to significantly large enough for the trader to make a decent profit.
Among the many choices available as a means of placing trades, the one that is most frequently used is a carry trade. A trader will borrow currency with a low interest rate and use it finance purchase of high yield currencies. It's easy and simple, and doesn't need much of a financial background to execute a forex trade. It would, however, be advisable to look up things like stop loss orders.
That's mostly because trading on the forex market involves leveraging and dazzlingly sums of money. All it needs is to open an account with a minimum balance, and it is then possible to engage in leveraged trades worth huge sums (tens of thousands in dollar value).
It's necessary to be very careful because there's a very low threshold for entry into the forex trading market. New traders can get started without any significant investments in tools or training or registration. To become an online forex trader, all that is really required is a computer with online connectivity and knowing how to use trading platforms. This last one is a skill that can easily be picked up by using a forex demo account before getting down to business for real.
