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Monday, October 5, 2009

What You Need to Know About Forex Trading!

By Ash Naeck

The existence of trading goes as far back as the ancient civilization and is present to this date in the world we live. It plays a crucial role in our everyday life and the concept has remained the same throughout the centuries. This concept is the trading of one good in return for another.

Trading in the older days was referred to as the barter process, where one would exchange some vegetables to get some rice in return. The process of bartering is thought to be the main source from where trading originated.

In present time, bartering has evolved and though the principals are the same, trading one good for another is made easy by the use of money. Money is the medium that makes trading possible and without this piece of paper no goods and services may be acquired.

In today's world, trading has taken a far more advanced approach compared to its traditional counterpart. Trading over the years has evolved in such a way that it not only constitutes of goods and services but goes far beyond that. The 21st century has given birth to currency traders who buy/sell the currency of one country to that of another country.

The market which is being referred to is the Forex market. The biggest most traded market on the planet. With a colossal US$ 3.5 Trillion traded every single day, this value is more significant when compared to all the other financial markets put together.

Millions of dollars are traded by major corporations daily. These companies form part of the wholesale market and comprises of banks and big hedge funds. They have the power to move the market from one direction to the other due to the large volume and amount of money traded on every single position taken. Those moves usually results in currencies going up and down in any single day thus changing the quotes of each currency throughout the day. The change in quotes most likely relates to profit made or loss incurred.

Forex market seems very appealing compared to the stock and futures market mainly due to the fact that it is a 24-hour open market. Trading starts in Sydney, Australia on Monday, then Tokyo, Europe, London until it reaches New York City, which is the last market to open each day. Trading is opened nearly 7 days a week making it the most active market to date.

The major pairs which are the EUR/USD, GBP/USD, USD/CHF and USD/JPY are the most traded pair on the market. Next are the YEN pairs namely GBP/JPY and EUR/JPY, the commodity pairs AUD/USD, NZD/USD and USD/CAD which are believed to be the second most traded pairs on the currency market.

My first insight in the world of trading begun when I was still at university, I was quite confused to how this process actually worked. However after some readings, it all made sense. You see, apart from using money to acquire goods and services, the same money could be use to buy or sell another currency in some other countries.

Currency trading which is the buying or selling of a country's currency against the currency of another country is effectuated by Forex traders. They are basically speculators who take advantage of fluctuations in currency quotes to make money. If they believe a currency will appreciate they are more than likely to buy this particular currency in the hope that they will make some profit when comes the time to sell. Traders with a good knowledge of the market make a great living trading forex.

Getting involved in the forex market nowadays has never been easier. Though you will need some understanding of the market, it is still easy to get your feet wet and experience firsthand, how the dealing process works.

Below is a rundown of what you will need to get started in forex:

- A computer

- Acces to Internet

- Money to trade

- A broker

That's it, simple and sweet!

Education is something that you will need to consider and I strongly recommend that you do educate yourself before jumping in this amazing forex adventure. With 5 years of trading under my belt I still learn new things every single day. Be humble, disciplined and teachable, do not try to make millions in a matter of days. Have a plan and a solid goal setting as this will pave your way to success. - 23212

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