Graphic Forex

ABC of Forex Trading

ABC of Forex Trading

Forex Trading, Foxex or FX refers to the direct access trading of currencies of different countries across the globe. Forex has its trading centers in all the major cities including London, New York, Frankfurt, Sydney and Tokyo. Forex opens 24/7 and is well recognized worldwide for its stable trading prospects, higher liquidity and huge volume. Earlier foreign exchange was limited to institutional traders and large banks.

However, in the current scenario, with a range of online trading platforms, even small traders can take lead of Forex trading due to the recent technological evolution.

The world currencies are usually traded in pairs and they exist on a floating exchange rate. Four major world currency pairs contribute to more than 80% of the daily transactions and they are usually utilized for investment. The four major world currency pairs are

• Ø British Pound against US dollar (GBP / USD)
• Ø Euro against US dollar (EUR / USD)
• Ø US dollar against Swiss Franc (USD / CHF)
• Ø US dollar against Japanese Yen (USD / JPY)

When the value of one currency appreciates against its pair, then you can exchange that second currency for the first. If the trend continues, then you can engage in opposite deal through which you can exchange the first currency back to the second and collect the resulting profit. However dividends are not paid in currencies.

With a daily turnover crossing $1.2 trillion on the Forex market, transactions are made at Forex Brokerage firms or major banks by the dealers. Dealers work 24/7 in three shifts and hence Forex market remains active 24 hours a day. Earlier Forex was not accessible to small scale speculators due to strict financial requirements and huge minimum transaction sizes. Therefore only large currency dealers and banks took advantage of the principal trending nature of all the major currency exchanges and the incredible liquidity of the currency market. But today, currency trading is not centered on a particular exchange. It goes a full circle from the major trading centers of Europe to the US, to Australia and New Zealand, to the Middle East and finally back to Europe.

Foreign exchange, Forex market brokers play a crucial role in providing equal opportunities for small individual traders by breaking the large-sized banking units and create a prospect to sell and buy any number of smaller units. The price movements and the rates offered to small speculators and companies are on par with the big players who were dictating the market in the past.