What is Forex Trading????????

Forex trading

The investor's goal in Forex trading is to profit from foreign currency movements. Forex trading or currency trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Aug 26th, 2003 was 1.0857. This number is also referred to as a "Forex rate" or just "rate" for short. If the investor had bought 1000 euros on that date, he would have paid 1085.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.60 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a "risk-free" investment. One example of a risk-free investment is long-term U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation.

When trading currencies, trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. If the currency you are buying does increase in value, you must sell back the other currency in order to lock in a profit. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position.

However, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency.

The Difference Forex and Futures

1. A Forex trader could trade more transaction compared to the futures market (the trading volume could be a times larger), and the risk will be strictly under control. The trading volume of the Forex market is 46 times larger compared to the futures market, moreover Forex traders could make more profit from the Forex market due to the larger trading volume (the transaction volume is a few times larger), the REFCO Switzerland rich transaction platform allowed transaction between 1-100 times to be carry on, moreover a Forex trader could decide his or her own transaction amount, for example: Your account has $30,000, the basic transaction unit is each $1,000 (which transaction amount in $1.00, million), namely, so the proportion of the margin of each transaction unit is 100:1.

2. The risk of the Forex trader is under control, such margin call will not happen compared to futures, through the Forex trading system, your risk will receive the strict limit, even if your margin if lower then the deposit required, the Forex trading system will automatically settle your position, this means even if a Forex trader suffered losses, moreover if the market is suffering from a disaster fluctuation, your loss could not surpass your account amount. In order to understand the advantages, please apply for the demo account to carry on the complete zero risk.

3. A Forex trader will receive a large limitation of liquidation and a relatively fair market because the trading volume of the Forex market is large and it is also the largest liquidation market in the world. At present the trading volume in the Forex market is 140 billion Dollars, such big market will completely digest your transaction cash.

4. A Forex trader may do 24 hours transactions and other markets are different, the Forex market is a 24 hour linkages market, it starts from every Sunday before dawn Australian Sydney market, substandard collect the transaction center Singapore, Tokyo, London, Frankfurt to New York continuously to open, such linkage market enable you to do 24 hours transactions, also provide flexibility for Forex trader to do transaction.