Hi there! If you're new here, you may want to subscribe to our RSS feed so you'll always get the latest from us. Should you have any questions, feel free to email Jude
I was talking to my group of friends in a cafe when they brought up on forex. I was really surprise by the misconceptions that they’ve brought up and had them straightened out over a good cuppa coffee.
We know that it’s a financial instrument, the biggest market as compared to stocks and bonds and is standing at 3.2 trillion USD turnover daily and is still growing, but what else is there you should really know about it?
Photocredit: ozbourne, Flickr
Forex Works Like Stocks
You buy, you hold and you sell. True to some extend. Unlike your usual stock exchange, forex markets rarely rests. It’s a 24 hour market, does not experience a daily closing market like traditional stock market and you don’t really have any regulatory bodies to govern your transactions.
The great beauty of forex is that not one big institutional trader (Or even the Central Bank of a particular country for that matters) can monopolize the market. True to some extent that they could push the price momentarily, but never over an extended period of time.
With a volume of 3 Trillion Dollars a day, it makes forex the largest market in the world as compared to stock market (more than 4 to 5 times bigger than stocks and futures combined on NYE)
No fees (or seldom fees are involved, unless you’re dealing with an ECN broker which still charges commissions but sometimes no spreads too) are involve as compared to the stock market (clearing fee, government fee, yada yada), brokers are compensated by what we call the bid-ask spread, which generally a little premium over what you are buying still very low as compared to any transaction fees on the stocks.
You can profit (or lose, of course) at a bull or bear market, which greatly differs from capital markets like stock exchange. I know people are going to argue the fact that you can short sell, but in some of the countries and in fact many, this is a very discouraged practice.
All these actually makes forex a very attractive platform for any traders to embark on. Just looking at the number of brokers that are offering free demo accounts, it’s unbelievable.
It’s Just Dollars and Pounds Isn’t It?
Uh no, you’ve got the wrong idea if you’re thinking that way. Almost all countries funds are involved in foreign exchange. The usual OTC (over the counter) forex brokers which are easily available online will be working mostly on a few pairs of currencies.
The most common currencies traded are:
- USD - US Dollar, United States
- EUR - Euro Dollar, Euro members
- JPY - Japanese Yen, Japan
- GBP - British Pound, Great Britain
- CHF - Swiss Franc, Switzerland
- CAD - Canadian Dollar, Canada
- AUD - Australian Dollar, Australia
- NZD - New Zealand Dollar, New Zealand
All the above are popularly traded against each other and they’re commonly known as majors (major pair). There are traders who does a particular pair only and most of them do have their own favorite pair (I suppose those pairs that reacts more often to what they have opened their positions on, winning trades).
You’ll usually see something like this, an example major pair
GBP/USD or just straight GBPUSD
The British Pound is traded against the US Dollar. Where the stronger currency (GBP) will always be in front. (Then again it depends too since we’ve saw the US dollar losing out to the Canadian dollar recently, the notion USD/CAD still remain)
There Are Forex Investment Programs That Can Make Me Thousands of Percentage of Returns!
Not true. Do take note of these promises, and report to the relevant authorities if need be. Chances of these being scams are generally very, very high. You can alert me as well so I could put up a scam warning on our old HYIP Blog.
Learning to Trade Forex is Difficult
There are many resources out there on the internet that are offering you step by step information on how to get started, learn more about forex and you would be surprise at how easy it is to understand what goes behind the scene when you open an account, open a position with your money and the many, MANY tutorials on different forex systems, indicators and more.
A highly recommended site to start with is Babypips, and another one would be NobsForex’s step by step guide (shameless, shameless!)
It’s not easy to learn and pick it up at all! But…
Forex Trading Is Easy!
That’s the thing. To start with one new venture, you will always have a learning curve, no matter what it is. Before venturing and starting to trade for real money, see how it feels like to bust some demo accounts with your new found knowledge and resources in forex. That’s where (and better be) you learn more about money management, the most important aspect of trading (no matter which investment market it is).
It’s not easy. I’ve tried, learn and had bad experience, but each experience along the way improves the way I trade. The longer you’re doing it, the better you’ll be. Hypothetically it’s like driving a car, you’ll get better as you drive longer.
Now if you’re already hyped up and ready to start with trading foreign exchange, good luck! (Now imagine those kids below were yours, hmm)
If you like our articles, please consider signing up for our RSS! Share This
Alright, Dish it out!