Contributors include: Kathy Lien, Boris Schlossberg, Casey Murphy, Chad Langager and Albert Phung
The foreign exchange market (forex or FX for short) is one of the most exciting, fast-paced markets around. Until recently, forex trading in the currency market had been the domain of large financial institutions, corporations, central banks, hedge funds and extremely wealthy individuals. The emergence of the internet has changed all of this, and now it is possible for average investors to buy and sell currencies easily with the click of a mouse through online brokerage accounts.
Daily currency fluctuations are usually very small. Most currency pairs move less than one cent per day, representing a less than 1% change in the value of the currency. This makes foreign exchange one of the least volatile financial markets around. Therefore, many currency speculators rely on the availability of enormous leverage to increase the value of potential movements. In the retail forex market, leverage can be as much as 250:1. Higher leverage can be extremely risky, but because of round-the-clock trading and deep liquidity, foreign exchange brokers have been able to make high leverage an industry standard in order to make the movements meaningful for currency traders.
Extreme liquidity and the availability of high leverage have helped to spur the market's rapid growth and made it the ideal place for many traders. Positions can be opened and closed within minutes or can be held for months. Currency prices are based on objective considerations of supply and demand and cannot be manipulated easily because the size of the market does not allow even the largest players, such as central banks, to move prices at will.
The forex market provides plenty of opportunity for investors. However, in order to be successful, a currency trader has to understand the basics behind currency movements.
The goal of this forex tutorial is to provide a foundation for investors or traders who are new to the foreign currency markets. We'll cover the basics of exchange rates, the market's history and the key concepts you need to understand in order to be able to participate in this market. We'll also venture into how to start trading foreign currencies and the different types of strategies that can be employed.
Forex Tutorial: What is Forex Trading?
TradingWith a long list of risks, losses associated with foreign exchange trading may be greater than initially expected. Here are the top 5 forex risks to avoid.
TradingForex trading may be profitable for hedge funds or unusually skilled currency traders, but for average retail traders, forex trading can lead to huge losses.
TradingIn an increasingly globalized economy, the significance of the foreign exchange marketplace cannot be underestimated.
TradingAs businesses continue to expand to markets all over the globe, the need to complete transactions in other countries’ currencies is only going to grow.
TradingWe look at how you can predict a currency movement by studying the stock market.