Wednesday, June 16, 2010

Forex Trading

Forex trading is an international exchange market whose daily average turnover is more than 1.5 trillion dollars. The word “FOREX” is abbreviated as FOREIGN EXCHANGE and in broad manner we would say it’s a market where one currency is traded for another and this is done in the hope that one can make profits on any losses or gains in the movement of currencies.

The trade of currencies is done in pairs i.e., the currency which one buy’s in the belief that in future its price will rise, the trading term related to this is called “the long position” and the other to sell in belief that its value will fall in future and the profit is made by buying it back on the lesser value, and the trading term related to this is called “the short position”.

The whole profit making in FOREX depends upon the movement between the 2 currencies which is not so high, so to make huge profits, one has to buy hundreds of dollars worth of currency at a time. Independent brokers and currency dealers make up a small percentage of FOREX TRADING but the major part comes from the banks, investment management firms and brokerages and according to The Wall Street Journal, the top ten currency traders which includes Deutsche Bank, UBS, HSBC, Barclays, etc., account for almost 73% of trading volume.

The trading can be done 24 hours a day except on the weekends, so it provides great opportunity for FOREX traders to work at their own conveniences. Due to its extreme liquidity and very high trading volume, the foreign exchange market is quite unique, but it said that FOREX TADING is not as easy as it seems so. A person new to FOREX TRADING should brush up his skills before getting his hands wet and should study both fundamental & technical analyses.

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