So, What is Forex Trading ?

Forex Trading

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FOREX TRADING

Forex Trading Graph

Forex Graph

FOREX MARKET

Forex Trading refers to the trading of currencies from different countries against each other. Forex is the short form of Foreign Exchange. Foreign exchange is the currency of any country anywhere in the world, such as the US Dollar, the Chinese Yuan, and the British Pound etc. The concept of forex trading is that one currency is exchanged for another. This is called currency trading.

For example, the currency in circulation in Europe is Euro (EUR) and in the United States the currency is the US Dollar (USD). You will buy the Euro and simultaneously sell the US Dollar. The Foreign Exchange is the largest exchange market in the world. It operated round the clock Sunday to Friday, and it is a 24 hour market. It does not close daily like the stock market. Furthermore, it is an international market, so it is bigger than any domestic stock market. Speculators on the forex market make money depending on the currency movements of the market and develop their own forex trading strategy. The most commonly traded currencies are the US Dollar, the Euro, the British Pound, and the Japanese Yen. With the recent boom of Internet technology and the prospects of quick, hefty profits, FOREX trading has grown in popularity among different investors.

Forex trading is usually done through a broker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can happen within just a few seconds.

As a trader you will choose a pair of currencies that you expect to change in value. Then you will place a trade accordingly. Hypothetically, if you had purchased 1,000 Euros in January, and it would have cost you around $1,200 USD. Throughout the year the Euros value vs. the U.S. Dollar’s value increased. At the end of the year let’s say 1,000 Euros was worth $1,300 U.S. Dollars. Now if you end your trade at this point, you would have a $100 gain.

Foreign Currency trading systems- Short position and Long position: You can take a position on a country, depending on what you believe are the future prospects for that country and then either buy or sell its currency. For example, if you believe that the US dollar will fall in value or depreciate against the Euro, you would sell US dollars now at a higher price with the expectation of buying them from the market at a lower price when the US dollar depreciates. You will make the differential payment between the higher price and the lower price per dollar that you sold. Since you did not actually have possession of US dollars at the time you sold them, it is called a short position.

The opposite of this is a long position. This means that you believe the US dollar will rise in value or appreciate and you buy US dollars with the expectation of selling them at a higher price when the market for them goes up. This is long trade or long position.