Forex Trading - Beginners Only

[Alan Perry]

An Introduction to the Forex market
The Forex market could be the most important marketplace to you and
your family. The currency trading that occurs almost everyday on the
Forex, determines how much spending power the money in your pocket
represents. This makes learning about the Forex trading process
crucial to your families' financial outlook.
Trying to understand the Forex marketplace can be confusing at first.
Unfamiliar terms like technical analysis, forex charts and leverage
can discourage you before you even start your learning curve. However,
if you can gain even a little knowledge of this marketplace, it will
help you to understand how the Forex affects your family in a real
way.
The Forex is the single largest marketplace in the world. It trades in
the range of 2 - 3 trillion dollars a day, 6 days a week, 24 hours a
day. Simply put, this is where your money is at. Trading currencies
use to require large amounts of money to even get into the game, plus
only banks had the ability to make trades. So unless you had a lot of
money to play with and you had an established relationship with a
large bank, you could not trade the Forex. Of course the internet
changed all of that by providing direct access to worldwide financial
markets through your desktop. Computer technology advances in the late
1990's developed online trading platforms that could be installed on
your desktop computer. These programs took advantage of the access
provided by the internet and today just about anyone can trade
currencies anywhere in the world with a computer and internet access.
As a result trading on the FX market exploded from a billion dollar-a-
day market in the 1970's, to a trillion dollar-a-day market today.
While the sheer size of the market represents the single largest
opportunity for financial gain available, it also represents an
equally large opportunity for financial ruin. If you plan on trading
on the Forex, it is advisable that you learn as much as possible first
in order to maximize you chances for success and minimize your risk of
failure. Hopefully, reading this article will be your first step
towards realizing this important goal.
The first concept that you must grasp is that while the Forex market
involves trading currencies in international capital markets, the
overwhelming majority of trades occur without the transfer of physical
items. All Forex trades are conducted in pairs of currencies and
neither the buyer nor seller is interested in actually taking
possession of actual currency. To accomplish this optimal set of
circumstances, a Forex trade is actually composed of contracts to buy
and sell pairs of currencies at a fixed rate of exchange. This fix
rate often fluctuates randomly throughout the course of the day and is
established generally by the market itself and more specifically by
the broker with whom you negotiate the terms of your individual
contract. The size of the Forex market, the amount of people
participating in it and the amount of money that is transferred on a
daily basis all combine to make the Forex a very attractive place to
do business. You can be sure that there will always be somebody buying
or selling what you want to buy or sell somewhere in the world and
because different countries do things differently, there will always
be a good potential for profits.
What I just described can be summed up by the term liquidity. By
definition, a liquid asset has the ability to be sold rapidly during
market hours and without appreciable loss of value. In the Forex
market, your asset would be the currency pair contract that you
purchased at a set price. Since the market runs 24 hours a day for 6
days a week, it's almost always open. Also, there are literally
millions of market participants buying and selling whenever the market
is open and the actual product being bought and sold is, well, Money!
With those characteristics, it's not hard to see that the Forex market
is probably the most liquid market in the world. This concept of
liquidity is very important and is one of the most attractive features
of trading currencies. Anyone who has ever gotten stuck with something
that used to be valuable that all of a sudden became so valueless that
you could not give it away, should understand that power of a liquid
market. You will never be in a situation where your asset, money, will
not be wanted by someone somewhere. They may not want to pay your
price but you will always have the option to cut your losses.
The term liquidity represents a core concept in the Forex market. The
large amount of money invested in the Forex combined with the large
number of investors gives the market a unique advantage gives it a
huge advantage over other investment strategies. This will become
clearer as we discuss Forex trading in depth and define some more
terms in my next article.
See you next article!