Forex

The word FOREX comes from ‘Foreign Exchange’ and it is the largest financial market in the world with an estimated turnover of $1.5 Trillion a day. The players o the Forex trading market are banks, brokers, dealers, financial institutions and private individuals. Trades are done online, using a Forex trading software platform /plenty of websites are offering such applications/ or through phone.

A very common term in the FX terminology is 'interbank', meaning two trading sides ready to exchange currency. As mentioned, on the Forex market, people exchange currencies, but statistics have shown that over 80% of all currencies are traded against the USD. So, the USD is the currency that is being traded the most. The next most traded currencies are the Euro (EUR), Pound Sterling (GBP), Japanese Yen (JPY), and Swiss Franc (CHF). Those currencies are called majors. The rate they are being traded at is called exchange rate.

When you trade, you always exchange one currency for another. For example, you can sell USD and buy EUR, or any other combination. Your goal in the Forex game is to know which currency will go up in relation to another. So if you know that the USD will go up (in the next few hours or in the long term) in relation to the EUR, then you should Sell Euro for US dollars and when the USD goes high, you sell it for EUR, and you will end up having more EUR then in at the point when you started.

On a daily basis, players in the FX market can experience profit/loss swings of 20-30% daily. The good part is that the market is open 24 hours, Monday to Friday, so you can react anytime to the changes, hence you always have the opportunity to get out of a loosing situation. There is also a Stop-loss policy that allows traders positions to be closed out if the position goes in the opposite direction (against you) and their account value falls below a certain margin requirement.

The FX market is so liquid that there is never a shortage of buyers or sellers. A liquid market is one in which there is enough activity to satisfy both buyers and sellers. Another major advantage is that trades are often done without commissions, which is very attractive for investors who want to make deals on a frequent basis. A good advice is to deal mostly with the majors, it's cheaper because of the high liquidity. And since the market never stops, opportunities arise all the time, whether a currency is strengthening or weakening in relation to another currency.