While you may not even realize it, if you have ever traveled to a foreign country you have probably taken part in the Forex market. Basically, the Forex market is based on currency exchange; exchanging your currency for a foreign currency. Whenever you travel to a different country it is usually more convenient to exchange your money into the currency of whatever country you are visiting.
Upon arrival, or sometimes beforehand if you want to save time, you sell your currency and buy the currency for the country where you are traveling. When you return home; you likely exchange the foreign currency back into your own currency. In most cases, you might have noticed something rather interesting. Even if it was only a day or so later, the exchange rates probably changed. This is because currency exchange rates are dynamic and ever-changing; they never remain the same. It is precisely these fluctuations in the currency market on which Forex is based. This is how it is possible for traders in the Forex market to make money.
You might have seen the foreign exchange market referred to as Forex or even sometimes as just FX. Most people think the New York Stock Exchange is the largest financial market in the world, but in reality it pales in comparison to the foreign exchange market. On an average day, the New York Stock Exchange conducts about $74 billion in volume.
Now, that’s certainly nothing to sneeze at, but when you compare it to the fact that the foreign exchange market conducts around $4 trillion in volume, the differences become readily visible. Yes, that’s $4 TRILLION! It’s little wonder that so many people love trading in this market and are interested in learning how to successfully trade on the foreign exchange market.
If you happen to be one of those people, which you likely are since you are reading this, it is important to know a few things. First, it’s important to recognize the many advantages offered by Forex, beyond just its sheer size.
For many people, one of the best advantages of Forex is the fact that you do not have to worry about any commissions. There are not any exchange fees, government fees, brokerage fees or clearing fees to be concerned about. Instead, retail brokers earn their profits through what is known as the bid-ask spread. This is something that we’ll get into more detail about later. In addition, you do not have to worry about dealing with any middlemen.
Spot trading takes care of removing middlemen, which makes it possible for you to make direct trades. There is also no fixed lot. You are able to determine your own position size in spot Forex. As a result, you could feasibly participate in the Forex market with an account as little as $25. Transaction costs are relatively low, especially in normal market conditions.
Another advantage that you might also notice is the fact that the market is open 24-hours a day. You never have to wait for that opening bell to ring before you can make a trade. This is why it is often said that this market never rests. If you are only interested in trading part-time, this can be excellent for you because it allows you to trade whenever it is most convenient for you; whether that happens to be in the middle of the day or the middle of the night.
Furthermore, you do not have to be concerned about a single entity taking control of the market. The main reason for this is because of the sheer size of the foreign exchange market. It is absolutely massive; allowing plenty of room for everyone to participate.
Barriers to entering the market are relatively low. You might initially think you would need a lot of begin to get started, but when you compare this market to others you see that you can easily get started within just a small amount. Many online Forex brokers may offer what are known as mini or even micro accounts available. Earlier we mentioned that you could get started for just $25. That was no exaggeration. While it might not necessarily be the best idea to get started using just the minimum amount of money, you certainly could if you so desired.
Finally, you can take advantage of numerous free or demo accounts that make it possible for you to practice your trading skills while you also improve them at the same time. Perhaps best of all, you can use these tools along with your skills within real-time. If you like the idea of practicing your skills with what is essentially play money before you actually go live and risk real money, this can be a great way to do so.
There are a few basics you need to understand before you get started on a live Forex market. This includes what is traded on the Forex market, why there are so many advantages to trading in Forex, who the players in this market, how to trade and the best times to make trades. Now, that might sound complicated, but when you look at it in small pieces you will see that it is really not that difficult. Furthermore, there are definitely advantages to becoming educated about the Forex market and how to successfully trade in this gigantic market.
Are you ready to learn how to become a successful Forex trader?