Your Forex Questions – Answered
For those used to buying and selling stocks and bonds the world of currency trading can seem like a strange and dangerous place. But with a little bit of knowledge and some good old fashioned common sense ordinary investors can learn to benefit greatly from even the tiniest changes in the values of currencies around the world. The key is to understand what Forex trading is and why it can be such a powerful tool for both traders and long term investors.
What is Forex
If you have an interest in currency trading you probably have come across the term Forex. This term is shorthand for the Foreign Exchange market. This exchange is the largest financial market on the planet, with an average daily turnover of more than one trillion U.S. dollars.
Forex trading involves the buying of one currency and the simultaneous selling of another, resulting in a dynamic and very active market for world currencies. The currencies trade at a floating exchange rate, with each exchange noted as a pair, i.e. Euro/Dollar.
Where Is the Forex Market Headquartered?
Unlike many stock exchanges the Forex market does not have a central location. This market is known as an interbank market, due to the participation of investment banks, commercial banks and other financial institutions in the trading. Forex transactions take place online or over the phone between two counterparts interested in currency exchange.
Who Are Forex Traders?
Forex traders run the gamut in terms of both wealth and experience, from vast networks of investment and commercial banks to individual traders and currency speculators. The Forex network includes money managers, registered currency dealers, institutional investors, money brokers, options traders and of course all those individual investors.
What Are the Hours for the Forex Trade?
The Forex market is a true 24 hour a day enterprise, with each new trading day starting in Sydney Australia and moving around the globe. After Sydney the market moves next to Tokyo, then to London and New York City. This 24 hour marketplace allows traders to quickly respond to news and political events, no matter when and where they may occur.
Which Currencies are Represented by Forex?
Currencies represented on the Forex market are generally those with the backing of stable governments and strong central banks. More than 85% of daily Forex trades involve these major currencies, including the U.S. dollar, the Japanese Yen, the Swiss Franc, the British Pound, the Australian Dollar and the Canadian Dollar.
Do I Need a Lot of Money to Get Started in Currency Trading?
Unlike many forms of investments, getting started with Forex requires relatively little capital. Many firms allow new traders to get started with as little as $200, making it easy for new traders to try their luck in this unique marketplace.