With the advent of online trading, the Forex markets are no more off limits to retail traders. In the past, Forex was the domain of prominent financial institutions, banks, and multinational corporations. However, the Foreign Exchange trading scene has been transformed from being what it was in the past and individual investors are jumping on to the Forex market with enthusiasm and anticipation. Even first time investors are looking to gain profits through currency trading; indeed, this has begun to interest more and more newcomers to the market.
To clear the currency trading basic concepts, let us first begin with what this unique market means to investors. Currency trading is not the same as stocks, futures or bond options in that this does not take place on a fixed exchange, and it is not monitored by a central governing head, nor are there any clearing houses to guarantee trades. The trading is made by members relying on credit arrangements with each other. In a day, over USD 3 trillion worth of transactions are made, which only goes to show how extensive the Forex markets are.
All currencies are given an International Standards Organization (ISO) code, which are used to express currency pairing. The ISO code for Euro is EUR, US dollars is USD, Japan Yen is JPY, and so on. Of course each currency has to be paired to another during trade, because essentially currencies are traded in pairs. These pairs form the 'ask'/ 'bid' price. You either buy a currency with the other currency in the pair, or sell the same in the other currency's units. In this connection, exchange rate is an important concept.
An exchange rate is the ratio of one currency against the value of another. The first currency is called the base currency, and the second is called the counter or quote currency. When buying, the exchange rate determines how much you should pay in the counter currency to buy one unit of the base currency. When selling, the exchange rate tells you how much you will receive in the counter currency units when you sell a single unit of the base currency. To take an example, let us look at the trading pair of EUR/USD, with the Forex quote of 1.2435/1.2440. To trade, you can either buy 1 Euro Dollar with 1.2440 US Dollars or sell 1 Euro at 1.2435. The difference in the two currencies is called the spread. To make money you need to sell at a higher price than the one you've bought in.
Currency trading is one of the biggest money making opportunity in the world. It is one of the most popular ways to make money from home.
To clear the currency trading basic concepts, let us first begin with what this unique market means to investors. Currency trading is not the same as stocks, futures or bond options in that this does not take place on a fixed exchange, and it is not monitored by a central governing head, nor are there any clearing houses to guarantee trades. The trading is made by members relying on credit arrangements with each other. In a day, over USD 3 trillion worth of transactions are made, which only goes to show how extensive the Forex markets are.
All currencies are given an International Standards Organization (ISO) code, which are used to express currency pairing. The ISO code for Euro is EUR, US dollars is USD, Japan Yen is JPY, and so on. Of course each currency has to be paired to another during trade, because essentially currencies are traded in pairs. These pairs form the 'ask'/ 'bid' price. You either buy a currency with the other currency in the pair, or sell the same in the other currency's units. In this connection, exchange rate is an important concept.
An exchange rate is the ratio of one currency against the value of another. The first currency is called the base currency, and the second is called the counter or quote currency. When buying, the exchange rate determines how much you should pay in the counter currency to buy one unit of the base currency. When selling, the exchange rate tells you how much you will receive in the counter currency units when you sell a single unit of the base currency. To take an example, let us look at the trading pair of EUR/USD, with the Forex quote of 1.2435/1.2440. To trade, you can either buy 1 Euro Dollar with 1.2440 US Dollars or sell 1 Euro at 1.2435. The difference in the two currencies is called the spread. To make money you need to sell at a higher price than the one you've bought in.
Currency trading is one of the biggest money making opportunity in the world. It is one of the most popular ways to make money from home.
