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that small traders can also take advantage of the many
benefits of forex trading just by using the various online
trading platforms to trade. The
currencies of the world are on a floating exchange rate, and they
are always traded in pairs Euro/Dollar, Dollar/Yen, etc. About 85
percent of all daily transactions involve trading of the major
currencies.
Four major currency pairs are usually used for investment purposes.
They are: Euro against US dollar, US dollar against Japanese yen,
British pound against US dollar, and US dollar against Swiss franc.
Right now I will show you how they look in the trading market:
EUR/USD, USD/JPY, GBP/USD, and USD/CHF. As a note you should know
that no dividends are paid on currencies.
If you think one currency will appreciate against another, you may
exchange that second currency for the first one and be able to stay
in it. |
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In case everything
goes as you plan it, eventually you may be able to make the opposite
deal in that you may exchange this first currency back for that
other and then collect profits from it.
Transactions on the FOREX market are performed by dealers at major
banks or FOREX brokerage companies. FOREX is a necessary part of the
world wide market, so when you are sleeping in the comfort of your
bed, the dealers in Europe are trading currencies with their
Japanese counterparts.
Therefore, it is reasonable for you to believe that the FOREX market
is active 24 hours a day and dealers at major institutions are
working 24/7 in three different shifts. Clients may place take-profit
and stop-loss orders with brokers for overnight execution.
Price movements on the FOREX market are very smooth and without the
gaps that you face almost every morning on the stock market. The
daily turnover on the FOREX market is somewhere around $1.2
trillion, so a new investor can enter and exit positions without any
problems.
The fact is that the FOREX market never stops, even on September 11,
2001 you could still get your hands on two-side quotes on currencies.
The currency market is the largest and oldest financial market in
the world. It is also called the foreign exchange market, FX market
for short. It is the biggest and most liquid market in the world,
and it is traded mostly through the 24 hour-a-day inter-bank
currency market.
When you compare them, you will see that the currency futures market
is only one per cent as big. Unlike the futures and stock markets,
trading currencies is not centered on an exchange. Trading moves
from major banking centers of the U.S. to Australia and New Zealand,
to the Far East, to Europe and finally back to the U.S. it is truly
a full circle trading game.
In the past, the forex inter-bank market was not available to small
speculators because of the large minimum transaction sizes and
strict financial requirements.
Banks, major currency dealers and sometimes even very large
speculator were the principal dealers. Only they were able to take
advantage of the currency market's fantastic liquidity and strong
trending nature of many of the world's primary currency exchange
rates.
Today, foreign exchange market brokers are able to break down the
larger sized inter-bank units, and offer small traders like you and
me the opportunity to buy or sell any number of these smaller units.
These brokers give any size trader, including individual speculators
or smaller companies, the option to trade at the same rates and
price movements as the big players who once dominated the market. |
