Monday, October 8, 2007

FOREX Trading 101

Welcome to the exciting and often very profitable world of foreign exchange trading or FOREX for short. Forex trading is the trading of different foreign currencies against one another, taking advantage of their ever fluctuating values to make very nice profits.

Forex trading, or currency trading, used to be out of the reach of the everyday investor until recent technological advancements took Forex out of the hands of large banks and institutional traders, and put it right in front of anyone with a computer and internet connection. Now there are dozens of Forex trading platforms available from a wide selection of brokers. Now anyone can learn to make money trading the currency market!

Although the major focus of the investment world appears to be on stocks and bonds, the currency market is the oldest and largest financial market in the world. The FOREX is a world-wide market, therefore, it is open 24 hours a day, 7 days a week. This eliminates the closing/opening gaps you see with traditional stocks ever morning. The Forex market trades approximately $1.2 trillion every day, making it a very liquid market, you'll never have a problem filling your buy or sell orders.

Forex trading is done with pairs, that is either buying or selling one currency against another currency. You profit from Forex trading when you take a position in a currency that you appreciates against the currency it is paired against. The great majority of daily Forex trading involves four major currency pairs. Currency trading usually involves the British Pound against the US dollar, the Euro against the US dollar, the US dollar against the Japanese Yen, and the US dollar against the Swiss Franc.

These four pairs are displayed on the FOREX as: GBP/USD, EUR/USD, USD/JPY, USD/CHF.

One major benefit of trading the Forex market, is leverage. Because of the liquidity of the Forex, most brokers offer the option to trade on margin with a leverage ratio as might as 400! Providing you with the opportunity to invest with a much small amount of capital and still pull in substantial profits.

The best way to get a grip on the FOREX is to educate yourself as much as possible on FOREX basics. Check out for more information on currency trading and learn how to trade like a pro!