The question “What is Forex trading?” can be answered in several different ways. Forex is the short name for foreign exchange currency market. This marketplace is responsible for trillions of transactions each day. The traders are located around the globe, but not in specific buildings. Instead, the transactions are handled over the Internet through institutions and individuals.
Each trade consists of a purchase of one currency and a sale of another nation’s currency at the same time. The change of the relationship of these two currencies over time is what makes a profit or loss on the trade. When you are exiting the position, you do the reverse action on the two individual currencies.
Most market trades occur in only a half dozen currency pairs. The most common transactions are those involving exchanges between the EURO, U. S. Dollar, Japanese yen, British pound, Australian dollar, Swiss franc and Canadian dollar. Sometimes the New Zealand dollar is considered in the above list. These pairs are described as one unit of the first currency compared to the units of the second currency.
The information presented to traders online is in a format called a trading platform. Different trading platforms have been developed. Some are very complex with market news, numerous indicators, different time charts and opinions from experts who know the market. Others present the basic information. Introducing brokers will typically offer a trading platform to clients at no cost. In some cases, choosing a broker and a platform is a matter of personal preference. You should experiment with the virtual platform to see which works best for you.
Traders have access to many different indicators. The computer software included with the trading platforms might provide a real time moving average, momentum measurements and Bollinger bands, just to mention a few. For some traders, a moving average using two or more time frames is all the information needed to determine when to enter or exit a trade.
Brokers contact investors to set up accounts. These firms set up managed accounts or facilitate individual trader account through online and telephone contacts. Most brokerages offer training modules or assistance for those who are not totally familiar with the entire process. A novice can receive personal one-on-one training when learning how the information on the platform can be accessed and managed.
Perhaps the major benefit that novice traders can access is the virtual accounts that are offered on most of the trading platforms and brokerages. You can watch the actions of the FX market in real time. You can use the indicators and market studies just as paying traders do. The virtual accounts operate in exactly the same was as a standard account does. You don’t need to pay a fee to use the platform. Usually you are allowed to practice as long as you like with virtual funds.
Determining what is Forex trading can open up a whole new way of investing funds. You need to be aware of the risks involved. No trade should be incurred without understanding the impact it will have on your finances, should the trade go against you.
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