What is Forex Trade?
The word "Forex" stands for foreign exchange. It is also known as FX. Forex trade can be defined as “the conversion of one currency into another currency or buying and selling of different currencies is known as forex trade”. In a forex trade, you buy one currency while at the same time put on the market another currency. You are exchanging the sold currency for the one you're buying. Currencies trade in pairs, like the Euro-US Dollar (EUR/USD) or US Dollar / Japanese Yen (USD/JPY).
What Is Forex Trade Market?
The forex trade market is the "place" where currencies are exchanged. Unlike stores or show rooms, there is no centralized exchange for forex trade. All transactions happen through phones or electronic networks. Currencies play a vital role the most people of this world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and businesses. If you are living in the America and want to buy cheese from France, either you or the company that you buy the cheese from has to pay the French for the cheese in Euros (EUR). This means that the U.S. importer would have to exchange the equivalent value of U.S. dollars (USD) into Euros. Similarly an Indian tourist in Egypt cannot pay in Rupees to see the pyramids because it is the currency which is not accepted by the locality. As such, the tourist has to exchange the Rupees for the local currency, in this case the Egyptian pound, at the present exchange rate.
Who trades currencies, and why?
Daily income in the world's currencies comes from two sources:
• Foreign trade (5%).
A lot of companies buy and sell products in different countries earn huge profits from foreign sales into domestic currency.
• Speculation for profit (95%).
The majority of traders concentrate on the biggest, most liquid currency pairs. A lot of traders include US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. In fact, more than 85% of daily forex trading happens in the chief currency pairs. The world's most traded market is trading 24 hours a day. With average daily income of US$3.2 trillion, forex trade market is the most traded market in the world. Forex trading begins 24-hour from Sunday 5 PM to Friday 5 PM in Sydney, and moves around the earth as the business day begins, first to Tokyo, London, and New York. Unlike other pecuniary markets, investors can act immediately in response of rise and falls of value of currency whenever they occur in day or night.
Why Forex Trading should be learnt?
You must already be aware that Forex trading is a very much profitable incomeway to make money from home or from work. Moreover, I am sure that you have knowledge about someone, or you have heard about someone who is already making good money in Forex trading. Why not you? No doubt it is true that 6 out of 10 traders lose money in the Forex market. That is right, 60% of individual Forex traders lose their hard-earned money in the market while the other 40% work freely at home and make a solid living out of Forex.
Characteristics 0f Foreign Exchange Trade Market
(1)-It is an easier and a firm incomeway. An ordinary person can achieve his goals by gaining a little experience of foreign exchange trade market.
(2)-The foreign exchange trade market is a global, universal, international, worldwide and decentralized over-the-counter financial market for trading currencies. Financial centers around the world perform their functions around the clock with the exception of weekends. The foreign exchange market concludes the relative values of different currencies.
(3)-The most important purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency.
(4)-In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying a quantity of another currency...
Why the Foreign Exchange Trade Market is Unique?
The foreign exchange trade market is unique because of
(I)-Its vast trading capacity, leading to high liquidity;
(ii)-Its geographical distribution;
(iii)-Its nonstop operation: 24 hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday;
(iv)-The variety of factors that affect exchange rates;
(v)-The low margins of relative profit compared with other markets of fixed income; and
(vi)-The use of force to enhance profit margins with respect to account size.
Key Factors That Move the Forex Market
For example, in Europe the currency in movement is called the Euro (EUR) and in the United States the currency in flow is called the US Dollar (USD). An example of a forex trade is to buy the Euro while at the same time selling US Dollar. This is called going long on the EUR/USD.
Forex trading is normally done through an agent or a broker. As a forex trader you can select a currency pair that you imagine to exchange in value and place a trade accordingly. For example, if you had purchased 2,000 Euros in January of 2008, it would have cost you around $2,200 USD. Throughout 2008 the value of Euro is raised as compared to USD. At the end of the year 2,000 Euros was worth $2,600 U.S. Dollars. If you had chosen to end your trade at that point, you would have earned $400.
Lastly forex trades can be performed through a broker or an agent. Orders can be granted with just a few clicks and then the broker passes the order to a partner in the market to fill your position. When you close your trade, the broker closes the position on the market and credits your account with the loss or profit. This can all happen literally within a few seconds