Forex Trading

Monday, February 27, 2006

Acquainting Yourself With Forex

Forex - commonly referred to as the Foreign Exchange Market, is
responsible for the purchase and sale of currencies throughout
the world. As such, it has established itself as the world’s
largest financial arena, generating in excess of a trillion
dollars each day in American dollars. Since the focus is on the
exchange of currencies, it’s understood that each transaction
involves two entities, e.g., trading U.S. dollars for Eurodollars
or U.S. dollars for pesos, etc. While a large portion of these
trades include U.S. dollars, those that don’t are referred to as
“cross currencies.”

Due to the time differences around the world, Forex is in
operation "round the clock". Each day, trading begins in Sydney
and spreads throughout the world as a new business day dawns in
each country. From Australia to Japan, and on to England and
America, Forex never sleeps, but continues its never-ending
journey around the globe to bring economic stability to its
inhabitants. The benefit of this scenario is that traders can
operate in a real-time setting.

Since only about 5% of the daily monies are generated through
purchases and sales by various governments and corporations, the
bulk of the trading is for speculation and/or profit. From the
perspective of speculation, the best trading comes about as a
result of “The Majors” - the most actively traded currencies,
such as the U.S. dollar, Euro Dollar, British Pound, Japanese
Yen, Swiss Franc, Australian Dollar and the Canadian Dollar. All
but approximately 15% of the transactions each day involve one or
more of these currencies.

The telephone network and World Wide Web are critical tools in
the ongoing operation of Forex, since trades are conducted
through these two avenues. A major internet crash, for instance,
could have a devastating impact on the economy, since the
operations within the Forex forum could be rendered
incapacitated. Unlike the Stock Market, Forex is not conducted
within a physical arena, but through telephone and internet
trading. As a result, this is considered to be an “over the
counter” market - and an extremely affluent one, at that.

Learning and comprehending the quoting system within Forex may be
a challenge to some, but it only requires a basic understanding
of how things work - and in what order. For instance, when
currencies are listed, the first one is considered the base
currency, and that currency - whichever one it happens to be - is
always considered to be “1”. In this way, you’ll be able to
monitor the rise and fall of that currency’s value as the trading
progresses.



Writer's Resource Box:
Jaimein Shun is an avid  Forex trader and webmaster
of ForexEye, a complete resource directory at your
fingertips on everything from charts and options to
trading platforms. To view his article archive, visit:
http://www.forexeye.com/newsletters

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