What Is The Foreign Exchange Market
If you don’t already know, attempting to learn the ins and outs of the FX/ Foreign exchange market can like running into hell with flammable shorts! (that’s
if you go ahead without AstroFx mentoring of course ) whilst getting to grips with the terminology alone can turn you insane!
In simple terms, the forex market is actively traded 5 days a week, 24 hours a day opening 10pm on a Sunday night and closing at 10pm on a Friday night.
Businesses, investors, governments, banks and retail traders ( such as yourself) exchange and speculate on the currencies that are available through an online broker, ultimately using probabilities ( fundamental/technical analysis) to predict the currencies next move either up or down!
These currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY) and anybody, anywhere is able to profit from the correct judgement and direction of their constant price fluctuations. The Forex market is the largest and most liquid market in the whole world with an average daily turnover of $4.98 Trillion dollars ( toppling over the stock market which is in the billions )
The main forex trading centres worldwide include: London, New York, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney. Once you have familiar-
ised yourself with a currency pair and your research indicates a certain position that you feel you will profit from, you may then work that position all day and night if you wish. Allowing you to potentially accumulate greater profits in a shorter amount of time than you could achieve if you were to trade stocks.
Forex V’s Stocks
You may be asking, what is the difference between trading forex cross pair currencies in comparison to trading stocks? Well... whilst the stock market is the
most traditional method to profit from an investment, it can turn into a time consuming and daunting experience, since there are tens of thousands of companies to choose to invest in out there.It is rather difficult to perfect a system that will make you more than 10-15% returns on a yearly basis and it is impossible to truly know when a company will decide to go bankrupt or fail completely. This is not to say one cannot make exceptional gains trading stocks, however it carries with it an immense risk and uncertainty when trying to play individual stocks for 20-30% gains in a short period of time.
In comparison to stocks, the Forex market is far simpler in nature, although it may entail a lot more self-education, since there are not as many commercial TV shows and learning guides dedicated to FX trading as there is with stocks. You should also note that there is in fact no central market place for the forex market and trading is said to be conducted ‘over the counter’, which is unlike stocks where all orders are processed via the central market place such as the NYSE.
The currency pairs traded in FX are products quoted by all the major banks, which are then fed through the broker (also known as the market middleman) who then delivers an overall average price to the retail trader (that’s you) to buy or sell with. So in forex, as there is no central market place, effectively it is
the broker who is transacting your desired trades, ‘making the market’ if you will. Therefore when you buy a currency pair it is your broker actively selling it to you, not another trader!