If the world and language of trading stocks and shares are completely alien, but something you want to get to know more about where can you start? The internet is packed with articles on these topics, but many assume you are already familiar with how things work, even if that’s just in a very basic sense.
That’s the place where this guide comes from – the need for a Forex 101 report which opens the mysterious doors of trading to pretty much anyone.
What is Forex in one sentence?
Forex (For = foreign, Ex = exchange), describes all exchanges which take place between two different currencies; if you have ever changed cash from your home country to another before traveling then you have been involved in a Forex transaction.
Forex exchanges cover more than just foreign tourism and travel, of course, with commerce and trading both taking huge chunks of the dealings too. So huge is the Forex market that statistics on it are almost cartoon-like – for example, could you imagine that internationally over 5 trillion USD are raded through it daily, or that it’s worth nearly two quadrillion in total.
Why the Forex market is so crucial
Until the day the entire world shares just once exclusive currency there needs to be a way for business sellers to receive payment from customers who use a different currency to themselves. (The same principle applies to those wanting to travel to a location with a different currency, although these transactions are generally done at a more micro level like an airport bureau or a small street-based money changer.)
So, no foreign exchange option would mean either simply doing without goods from foreign lands, or perhaps, at best, a return to bartering!
A Forex secret you probably don’t know
Images of frantically busy spaces like the New York, Tokyo, or London stock exchanges are probably the first to come to mind if asked where financial buying and selling takes place, but the truth is there is no shared, central marketplace for Forex transactions. Instead, everything happens between electronic trades made between traders. To read more about all aspects of Forex trading check out EagleFX.
It’s almost a 24/7 hour business
For five and a half days a week, (from Monday opening to Saturday lunchtime close), traders are working the constantly open Forex market. As major Forex players are based in far-flung locations including Japan, Germany, Australia, and America different sections are active at various times, and the prices quoted are always changing.
Forex markets and players
Many people trading on the Forex market are bank employees, working on behalf of their customers but that doesn’t mean individual investors are excluded. Indeed, there are plenty of opportunities for independents to trade the spot, forward or futures Forex markets.
The spot market
Here currency is bought and sold at a real-time price, which fluctuates depending on current supply and demand. Consequently, prices are changing all the time, influenced by things like both local and international politics and interest rates. Spot market traders need to stay up to date with what’s happening in the world. This is the most popular area for non-corporate Forex traders.