Forex Trading Info

Forex trading, or just FX for short, is the practice of trading of the world's many currencies. The term is a conjuction of "Foreign" and "Exchange".

The Forex trading market is the largest trading market in the world. Total daily trades currently average over $3 trillion - thats $3,000,000,000,000 or a 4 with twelve zero's after it!

Forex trading is highly speculative. unlike the more traditional stock markets which trade through a central exchange, Forex trades on the interbank market. This is an over-the-counter or OTC market with trades taking place directly between the buyer and the seller

The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution of trading centres means that the Forex market is a 24-hour market.

When currencies are traded, a combination is called a cross.  These might be, the British pound / Japanese yen, or the US dollar / euro. most trades take place between water called the "majors": EURUSD, USDJPY, USDCHF and GBPUSD.

The spot market most important Forex market is the "spot market" as it has the largest volume. It is called the spot market because trades are settled immediately, or “on the spot”. In practice this means two banking days.

Looking at a Forex Trading quote might seem confusing at first, but it's actually quite simple. Remember that foreign exchange trades in pairs.  The first currency is the base currency, and it's "base value" is always 1.

The Forex market revolves around US currency, and it is normally considered the 'base' currency for quotes. In the "Majors", this includes USD/JPY, USD/CHF and USD/CAD. For this and most other currencies, quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/JPY 110.01 means that one U.S. dollar is equal to 110.01 Japanese yen.

In EUR/USD, a 3 pip spread is quoted as 1.2500/1.2503In USD/JPY, a 3 pip spread is quoted as 114.05/114.08In the Forex market, prices are quoted "pips". Pip stands for "percentage in point" and is the fourth decimal point, which is 1/100th of 1%.

Among the major currencies, the only exception to that rule is the Japanese yen. In USD/JPY, the quotation is only taken out to two decimal points (i.e. to 1/100 th of yen, as opposed to 1/1000th with other major currencies).

Being able to predict what is going to happen in the next period of time or when a specific currency exchange rate will change is the core of fx trading and where people gain profit. To reach that level of ability, you might want to attend some courses about forex trading, read some foreign currency exchange strategies, and observe the market that you will be entering for a while and try to analyze what is happening from increases and decreases and why they happen. Then you can open a forex trading account to apply what you have learned and see if you fit in the trading market or not.