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For those
of you who don’t know it already, FOREX trading is a form of direct access
trading for different kinds of foreign currencies.
Formerly,
foreign exchange trading was generally limited to big banks and
institutionalized traders. However, recent advancements in technology have
made it so that smaller traders can also make the most of FOREX’s many
benefits by making use of the diverse online trading stands to
trade.
All the world’s currencies are on exchange rates which
is constantly fluctuating. These currencies are also always traded in pairs
Dollar/Pound, Euro/Dollar, etc. Approximately 85 per cent of all the
transactions which are recorded daily involve trading of all the major
currencies.
For investment reasons 4 (four) main currency pairs are usually used. These currencies are: the Euro against the US dollar, the US dollar against the Japanese Yen, the British pound against the US dollar, and the US dollar against the Swiss franc. In the trading market these four currency pairs look like this:
EUR/USD
USD/JPY
GBP/USD, and
USD/CHF.
Take note also that no dividends are paid on currencies.
If you think one currency will increase in value against another currency you may exchange the latter for the former and be able to stay in it. If everything goes as planned, eventually the opposite deal can be made in that you can exchange this first currency back for that other and then collect all the profits it may bring.
FOREX market transactions are carried out by dealers at main banks as well as FOREX companies for brokerage. FOREX is a necessary and very much ongoing part of the world wide market. When you’re sleeping in your bed at night, dealers in Europe will be trading currencies along with their Japanese colleagues.
It is therefore indeed reasonable that you consider that the FOREX market is active 24 hours a day. Dealers at major institutions have their 24/7 work in three separate shifts. Clients are able to place, take-profit, and stop-loss orders with the brokers for an execution which can be done overnight.
The price movements are quite smooth on the FOREX market and without the gaps that people face almost every day on the stock market. The FOREX market’s daily turnover is approximately $1.2 trillion, so a new investor will have no problems with enter and exit positions.
Read more FOREX facts
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