Forex or FX is a combination of the words foreign exchange, and is used to refer to the foreign exchange financial market. It is necessary to exchange currencies in order to trade or do business with a foreign country, whether acting as an individual or as a company. This daily need to exchange currencies among countries is mostly what makes Forex the largest world market, and the platform for global currency trade. Forex trading is unique in that everything is conducted electronically by traders around the globe, working through financial institutions, mostly banks. The market is open for five and a half days around the clock. The differences in time zones around the world means traders from some countries are always awake, and this makes the market constantly active and ever-changing.
Two currencies are always involved in Forex trading as investors are comparing the value of one currency to another. For example, these pairs may be written as EUR/USD, which compares euros to dollars, the most widely exchanged currencies. These two numbers let traders see the value of the first as compared to the second. The first of the pair represents one unit known as the base and the second is called the quote, which tells how much of that particular currency it takes to buy the base. Traders are buying and selling the base, and can constantly see a buy price and a sell price. Trading can go up or down. Currencies that are expected to increase in value are bought, and sold if a decrease is anticipated. Of course, the amount of confidence a trader has that a currency will increase or decrease affects how much of the currency will be bought or sold. Because the market is so huge, finding a buyer or a seller is seldom difficult. Experienced traders have a sense of trends and are more likely to make sound buying and selling decisions, while newcomers sometimes realize the hard way that forex trading is a high risk business. Huge profits can be made, but it is also common to experience significant loss.
Traders will see exchange rates written as decimals, carried out to the fourth or fifth decimal point. For example, EUR/USD 1.20042 may be displayed. This means that it takes 1.20042 dollars to buy one euro. Traders must watch carefully as changes in currency value can occur rapidly. Economic and political factors can influence the value of currency. Some traders prefer to make short term moves, and buy and sell at the first signs of a change in currency value, while others prefer to take a more long term approach, and wait for greater changes before considering a buy or sell.
Successful traders must keep up with current economic events and be aware of global issues that may affect currency exchange. One example is the fast growth of BronzeMarkets which will lead to an even greater need for currency exchange, as countries worldwide are expected to experience a rising demand for bronze. Any events that lead to increased trade between countries is of interest to Forex traders, as the currency exchange rate may be affected.
Forex trading appeals to many new traders due to its rapid pace and opportunity to make big profits quickly. Anyone can get started, as long as there is access to the internet. While the overall process is fairly easy to learn and understand, being a successful trader takes a complex set of skills and strategies, and a dedication to master those skills and implement the strategies effectively.