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Forex Trading - 15 "Baits" To Pull You Into Forex Trading!

Apr 2, 2008
"Trading" has evolved into a huge global business today, attracting more and more people into the arena! There are different kinds of markets that the trader or investor can deal with, such as--the foreign exchange market, the stock market and the underground market. When comparing all these markets, it is evident that foreign currency trading or Forex trading, has overtaken the others where popularity is concerned!

Let us figure out what exactly is Forex trading, and why it has become so widely accepted today--

(1) Forex trading is just another name given to foreign currency trading. No commodity is actually being bought or sold in this market. Like the name suggests, there is trading centered round currencies of other countries and any other product that is similar.

(2) Each country has a different currency. The different currencies in different countries, are weighed against one another. One currency may have a lower or higher value as compared to the other.

(3) Unlike a stock market transaction where individuals or groups participate, here the transaction involves two countries. A broker acts as a mediator.

(4) The currencies that are generally seen in Forex trading are--the USD or US Dollar, CAD or Canadian Dollar, AUD or Australian Dollar, GBP or British Pound, EUR or Euro, CHF or Swiss Franc, and JPY or Japanese Yen.

(5) Currency trading takes place in pairs. They are generally paired as--USD/CHF (US Dollar and Swiss Franc), EUR/USD (Euro and US Dollar), GBP/USD (British Pound and US Dollar), and USD/Yen (US Dollar and Japanese Yen).

(6) Transactions are conducted online, since they are only a matter of entries made on a computer. Trading here means "making an entry on the value of one currency against another".

For instance, a certain number of Euros are bought with the help of Dollars. When the price of the Euro goes up, these Euros can be sold. Thus, the investor or trader gets a profit. If the value goes down, it is better to wait before selling.

(7) Despite being one of the leading global financial markets ($1.5 trillion turnover every day), there is no central governing body where Forex trading is concerned; no panels or clearing houses to settle trades of disputes.

(6) All that is required to play in this market is that the trader or investor should possess enough capital. Otherwise, there are absolutely no limits set on the size of the position that he/she wishes to buy or sell.

(7) Almost 80% of foreign exchange market activity consists of "purely speculative" trading! Barely 20% is alloted for "actual" exchanging of currencies!

(8) Who are the ones generally associated with foreign currency trading?

They are--a few private individuals, commercial banks, retail investors, firms concerned with foreign trade, broker companies, central banks and investment funds. They are mainly from Asia, North America and Europe.

(9) The investors or traders concerned with this business either have great wealth, or have cash businesses of their own. There are others who are interested in trading assets that are easy to buy and sell. Whatever their background may be, these businessmen/businesswomen are happy to have the Forex market open all 24 hours in a day!

(10) Coming to assets, transactions concerning them are completed very rapidly, within a few seconds! Also, these assets have the benefit of high liquidity.

(11) The investor or trader is welcome to keep a position open for as long as he wants to, absolutely free of cost. This is a boon as there is always the chance of a larger profit in future!

(12) Forex trading requires fundamental analysis as well as technical analysis, for better understanding of market trends.

(13) Fundamental analysis refers to the research of current conditions in a particular country (if the investor or trader is interested in the currency of that country)--tax policy, political instability, interest of the Central Bank, unemployment rate, rate of inflation, etc. This study is important for those who are pouring a large amount of funds into foreign exchange.

(14) Smaller or medium investors or traders prefer technical analysis. Price is more important than anything else where they are concerned!

(15) In conclusion, Forex trading has been responsible for "inviting" more and more people (small players and big business houses) into the trading community! There is always the lure of huge gains! Additionally, the process itself is easy-to-understand and very interactive.
About the Author
Abhishek has an uncanny insight into Trading! Visit his website www.Trading-Masters.com and download his FREE Trading Report and learn some amazing Trading tips and tricks for FREE. His tips would save you thousands and make you better at Trading! But hurry, only limited Free copies available! www.Trading-Masters.com
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