There are numerous different terms for the forex market. Forex and fx are both short ways of saying ‘foreign exchange’. It may also be called the currency market, the foreign currency market, the currency trading market, etc. All of these terms refer to the same international market on which the currencies of the world are exchanged and traded.
Currencies are bought & sold just like any other commodity; coffee, steel, coal etc.
The value of a currency is, in a sense, the value of the nation whose currency it is. Just like companies on the stock market. If a nation is successful the value of its currency increases and if it is going though a crisis the value drops.
These fluctuations can be great and can happen very fast. The sums involved can be huge too. It is these daily fluctuations that we aim to take advantage of as a Forex trader.
History of The forex market.
Up until the 1970s, currencies had been stable relative to one another
since the second world war. What was called the ‘gold standard’ gave every currency a value in relation to the US dollar. This system was introduced in order to maintain a stable world economy.
However, in the early 70s the USA abandoned the gold standard and the
values of the different currencies began to change. Banks immediately began to exchange currencies for profit, buying low and selling high, instead of only making exchanges when they needed to transfer money from
one country to another. In effect, each currency became a tradeable commodity. This was the beginning of forex trading.
Where is the forex market based ?
The trading of currencies, the “forex market” is not housed in a physical building nor is it a specific business or entity. Rather it is a computerised network of traders, bankers & brokers situated all over the world.
London & New York are the main centres of business, but practically every country is involved. Therefore it is possible to trade virtually every currency from anywhere in the world.
Who can trade forex ?
The market is still dominated by Investment banks, Major corporations &
other large financial institutions who are responsible for 98% of the $2+ trillion a day that changes hands on the forex markets.
Until recently it was only possible to trade forex if you had a large pot of money (anything less than $500.000 and a broker really wasn’t interested).
However, it is now possible to trade as a private individual through a broker from as little as $250.
There are now a large number of people involved in forex trading through their home computers, although because they trade much smaller amounts than the institutions, they only account for around 2% of the total forex market.
Conclusion
We have established that there are no physical barriers to trading forex (as long as you have access to a computer with broad band connection). However, although its easy to connect to the same systems & real-time data feeds that professional currency traders around the world are using, it is also extremely easy to lose a lot of money VERY quickly !
It is vital that you learn the basics of the forex market, before opening your wallet.
As Warren Buffet famously stated, ” Never invest in a business that you don’t understand”.
Where can you learn to trade forex for free ?
I have written a number of articles for beginners (parts of them should be interesting for intermediate traders too). This free advice will give you the basic idea of how to trade the forex markets. You may decide that its not for you. In which case, you have hopefully learned something new & it hasn’t cost you a penny.
If, having read my mini course you wish to take your interest further I will give free, HONEST advice of where to go next (there are lots of courses out there costing many $1000′s – I paid $3000+ 5 years ago).
The best that I have found recently cost $50 !! Check out my free forex training course here;
http://www.forex-fxtrader.com/Free-Forex-training.html
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