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Foreign Exchange Trading Quick Facts

Jun 19, 2008
Forex stands for the foreign exchange market where large banks, central banks, currency speculators, multinational corporations, governments, hedge funds, and other financial markets and institutions buy or sell one currency for another. Much like stocks buyers seek to buy at the lowest available price and sellers seek to sell at the highest available price.

Forex trading is fascinating, but does bear certain financial risks. It is quite possible to play the forex money game as a winner, but there is also a risk of losing money, especially if you enter forex trading without a good understanding of how to read forex charts and how to recognize the type of news that moves markets. In forex changes in price levels often happen fast so you have to be prepared to take part in a fast moving game.

Forex is the largest financial market in the world, far larger in daily trading volume than the world's stock markets. There is always an opportunity for you to make or to lose money. Forex is a 24-hour market, so 24-hour support is a must. When you trade you should be able to contact the firm by Internet and as a backup by phone, email, or chat. The speed at which you can conduct communications is important so you should make sure that all works well prior to trading with real money.

The forex market is a virtual network of currency dealers connected among themselves by means of high speed communications channels. Forex currency dealers are connected to leading world financial centres, and stay connected around the clock.

Currency trading (forex trading) is not suitable for everyone. It is speculative in nature and a substantial risk of loss exists. You can in fact lose all of your investment. Currencies are always traded in pairs. So if you are buying Euros then you would be selling US Dollars or some other currency concurrently. The price of the currency bought as compared to the price of the currency sold is called the exchange rate.

Currency rates are influenced by many factors, including political events and economic developments in national economies, as well as investor attitudes. If you are able to understand and analyze these factors as well as accurately interpret forex chart patterns you could make profitable trades in forex and make money while trading from your home or from wherever you choose.

Risk Disclaimer: Foreign currency trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, risk appetite, and the ability to take losses should you end up on the wrong side of the market a bit too often.
About the Author
Gerald "Taipan" Greene is a retired forex trader and portfolio manager who worked in Asia for over 20 years. He now writes for a number of financial, political, and Internet business related blogs. One of them is at Learn to Trade Forex
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