If you've ever visited abroad, you must have noticed that there's a thing called exchanging currencies. For example a dweller of the United States should exchange his US Dollars into Euros if he or she pay a visit to a country of the EU.That's because different countries work with different currencies, and you can't use your own country's currency all over the Earth.For example in Japan the Japanese yen is the only officially accepted type of money (currency) to pay with.
Forex is all about these currency trades. It is about trading certain countries' currencies against each other. Similarly to the above example, you can exchange USD for yen, Euro, HUF, AUD, CAD, etc. or any other combination.In its name, For stands for foreign, while ex stands for exchange: For(eign)ex(change).That's the explanation why it's called foreign exchange.
How does trading currencies work?
At first glance, the whole idea of trading one currency for another might seem confusing or downright worthless; but it makes perfect sense once you get to know the fine points.Let's examine a theoretical example.
It's possible that in the beginning of the year one thousand Australian dollars are worth one thousand and a hundred American dollars, but by the end of the same year the same amount of Australian dollars are worth one thousand and two hundred $. That would denote that if some people bought one thousand AUD in the beginning of 2011, he or she could sell it for one thousand and two hundred USD at the end of the year, making himself or herself a $100 profit.That's the way Forex trading can be profitable. Martin has been providing inspiration and training leaders and individuals for several years on the subjects of Futures Day Trading and Trading Psychology.
Where is the Forex market?
That's all great, but where do people trade currencies? In the special case of Forex trading, the market is offered in a wonderful way.There isn't one special place or center where all currency trades happen. Everyone cares their transactions and exchanges in the virtual world by computer networks. The method's name is over-the-counter (often abbreviated as OTC) which, in this context, means that all currencies are traded through a broad dealer network.
You may find shocking that the Forex trading market is the largest financial market in the world with its 4 trillion USD per day trade volume. Yes, that means that even the NY Stock Exchange falls short compared to the FX marketplace (that's a huge achievement, even if we consider that that 4 trillion dollars refer to the whole foreign exchange market).
Because it is a international project, the Forex market is never turned off, it operates twenty four hours every day, most of the week.
You may be wondering what determines whether one currency beats another one or the contrary. Lots of aspects are taken into evaluation when a currency's value is calculated. The price is mainly calculated by comparing supply and demand figures, economic power, political situations with future predictions and theories of one country's currency against another one. The most widely used and traded currencies include the USD, Australian dollar, Euro, Swiss Franc and British Pound. As strange as it sounds, more than 85% of all trades consist of a combination of these money types.
An attracting aspect of the Forex market is that you don't have to be an expert to earn from it. Of course some education can be beneficial, it isn't needed, thanks to some software that have been invented to help out the average traders. Most of these programs are good at placing and taking orders automatically, without needing the trader to be at the computer.
When a person gains in the foreign exchange market, it's clear that another one loses at the same time. If two people bet against each other (they count on different currencies) they cannot profit both at the same time, one of them has to lose.
And that's the explanation why trading Forex is not an ideal way of making money for the average Joe. Income is never guaranteed when trading the stock market and it's not any different in the case of foreign exchanges. If you want to be a responsible parent or mother, you shouldn't rely fully on foreign exchanges. That's not to say you should stay away from trading at all, but it's always wise to take the needed precautions and be prepared for the nastiest case scenario.
To sum it up, you can try trading as long as you don't peril the life of you or your family.
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