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What is Forex?

Aug 17, 2007
Forex also known as the Foreign Exchange is the name given to the "direct access" trading of foreign currencies.

Forex is not simple, but certainly an education is needed to make wise investment decisions. Though it may seem relatively easy to start trading on the magnificent Forex, the fact cannot be denied that there are risks involved too. So finding out as much as possible about the market is a good move for any beginner.

How to work on Forex?

Opening a Forex account can be as simple as filling out a form and providing the necessary ID. This form will include a margin agreement that mentions that the broker can interfere with any trade it deems to be too risky.

This is to protect the interests of the broker at most trades. Since all Forex trades are done using the broker's money. Once your account has been established, you can fund it and start to trade.

Trading Forex through AFOREX is quite remarkable. So whatever you think of trading can be found here or on the magnificent AFOREX Trading Station. You could also open up a live Forex trading account right now or a free demo account with maybe some $50,000 worth of virtual money.

The major highlight within the Forex market, are the currencies that are always priced and traded in pairs. You can simultaneously buy one currency and sell the other. You can also most defiantly settle on which pair of currencies you wish to trade.

Point to be considered here in most cases is that if you or someone that understands and has expert knowledge believe that the value of the Eurodollar is going to increase compared to the U.S. dollar, then you would buy the euro element within the euro/U.S. dollar pair.

The objective of Forex currency trading is to exchange one currency for another within the expectation so that the market rate or say the price will change. The currency you bought has increased its value relative to the one you sold.

Thus, in most cases, if you or someone that understands and has the expert knowledge are in possesion of a currency and the price rises in value, then you must sell the currency back in order to lock the highlight within the profit.

A Forex trade is one in which a trader has either bought or sold one currency pair and has not sold or bought back the equivalent amount to successfully close the position.

In Forex trade the first currency highlight within the pair is referred to as the base currency, and the second currency is called as the counter or the quote currency. The U.S. dollar has always undoubtedly been seen as the world's dominant currency, and is usually considered as the base currency for quotes.

During Forex trade the quotes includes USD/JPY, USD/CHF, and USD/CAD. This means that quotes are expressed as a unit of $1 USD per the other currency quoted resource within the pair. The exceptions seem to be the euro, brilliant Britain pound, and Australian dollar. These currencies in Forex trade are quoted as dollars per foreign currency.

Similar with most traded financial products, Forex quotes include a "bid" and "ask." The ask is the price at which a market maker will sell and you can easily buy the base currency in exchange for the counter currency.

It is always known that in a Forex trade the bid is the price at which a market maker is willing to buy and you can sell the base currency in exchange for the counter currency. The difference between the bid and the ask price is referred to as the spread. With Forex trade, you obtain tight spreads reflected in our firm prices quoted to buy or sell each currency pair.

The Forex margin deposit is not a down payment on a purchase. Rather, the margin is a referred to as a good faith deposit, to ensure against trading losses. The margin requirement allows you to hold a position much larger than your actual account value. Forex online trading platform has margin-management capabilities that allow you to get up to 200:1 leverage.

The trading platform almost performs like an automatic pre-trade check for margin availability and will only then execute the trade if you have sufficient margin funds in your account. The system also calculates the funds needed for current positions and displays this information to you in the available real time.

Forex traders generally require a broker to handle their transactions. Almost many brokers are reputable and are associated with large financial institutions like the banks.

A reputable broker will has to be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against any fraud Forex trade and abusive trade practices.

With an average daily volume of $1.4 trillion, Forex is 46 times larger than all the future markets combined and, is the world's most liquid market for this very reason.

Forex trading was limited largely to enormous money center banks and other institutional traders but in just the recent past few years, technological innovations and the growth of online trading platforms allow small traders to gain the benefits of the significant trading of foreign currencies with forex.
About the Author
William Smith the author provides much more financial information on many subjects as well as the secret to his success in the market along with 5 Free power stock picks emailed daily so grab your Free subscription on his website at Forex (All is Free)
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