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Why Traders Love The FOREX Market


RusefTrader

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The Foreign Exchange market (Forex) is truly the largest exchange in the world. The amount of dollars traded on the Forex market on a daily basis is in the trillions. Most of this currency trading takes place between between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. However, individual traders are starting to get in the mix, using internet discount brokers such as Etrade to participate in the currency exchange market.

There is no central exchange or meeting place for the Forex. All trading is done over computer networks between traders in different parts of the world. Also, unlike the stock market, the foreign exchange market is open 24 hours per day, because it is a global market. A trader in Hong Kong may be exchanging currency with a trader in Australia while an American trader is sleeping.

There are several different markets within the Forex exchange system. First, there is the spot market. The spot market deals with trades that are based on the current values of currencies. One person trades a certain amount of currency with another trader in exchange for an equivalent amount of a different foreign currency. Spot trades take two days for settlement.

The other two types of foreign exchange markets are the forward and futures markets. In the forward market, the buyer and seller agree on an exchange rate and a transaction date is set for a specific time in the future, at which point the trade is executed regardless of what the rates are at that time. On the futures market, futures contracts are bought and sold based upon a standard contract size and maturity date. Futures trades take place on public commodities markets.

A currency quote is listed differently from a stock quote. Stocks are quoted in terms of price per share. Currency exchange prices are listed as either a direct quote or an indirect quote. A direct quote uses the domestic currency as the base and the foreign currency as the quote. An indirect quote works the exact opposite way.

So, if you were to view a quote in an American newspaper that said USD/JPY = 75, that would be a direct quote and would mean that $1 of U.S. currency is equal to 75 Japanese yen. If that same quote appeared in that same American newspaper and was listed as JPY/USD = 0.013, that would be an example of an indirect quote.

As with stock prices, currency exchange prices have a bid and ask spread. The current bid is the amount of foreign currency that someone is willing to spend in order to buy $1 U.S. base currency. The ask is the amount of foreign currency that someone is demanding in order to be willing to sell $1 U.S. base currency.

The Forex markets are generally considered to be less volatile than then stock market because within the course of a trading day, it is highly unlikely for the value of a single currency to move all that much. With equities, it is not uncommon for a trader to buy a stock, and then a negative press release causes the stock to lose considerable value within a day or even a couple of hours. Sometimes, however, the Forex can be volatile. If there is a significant economic or political development with a certain country, the currency of that country can lose value quickly.

There is a higher degree of liquidity on the currency exchange then there is on the stock exchange because the currency exchange is open 24 hours per day and because the very nature of currency exchange is to bet on when certain currencies will go up or down; so, it is easy to sell your position in a certain currency even when the value of that money is going down. A plummeting stock is more difficult to unload, but not impossible.

If you want to begin currency tranding, try to set aside some money and open an account with an online broker. Start slowly, then as you get the hang of it, work your way up to larger trades and higher volume. However, do not gamble your nest egg on currency trading because inexperienced traders can lose everything they have rather quickly in spite of the relative safety of the Forex market.

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  • 5 months later...

All of the analysis is perfect. Most of the traders find forex market easy money, and make mistakes such as absence of trading plan, fear and greed, not following reliable forex trading signals i.e. SignalSkyline, overconfidence, revenge trading, chasing the market, overleveraging/improper money management, booking small profits and letting your losses run. In forex trading it's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.

 

The habit of looking on the best side of every event is worth more than a thousand dollars a year. Success does not lie in results, but in efforts, being the best is not so important, doing the best is all that matters.

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  • 6 months later...

I agree with you Jennifer Taylor,  First of all, if you are going to be a trader you must control your feelings, your behavior, your reaction to the market, and to any loss you confront; it’s a psychological game that you should be aware of and ready for, otherwise you will lose your money sooner or later from being so greedy or being so hesitant. So remember, always stop yourself from falling prey to your emotions, balance is the key.

 
Secondly, the charts you see of any pairs is like someone who is talking to you but highly intelligent and sometimes unpredictable so you need to learn his language correctly so as to react to his actions. This is in essence the Forex Market. It takes a lot of effort to understand each pair’s personality, in addition to its nature and to control your own desires and nature.See more in currency fundamental analysis in Alpari.com
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  • 2 months later...

Why traders love the forex market? Why not? Forex market can change your fortunes in a single day. The adrenaline rush makes your body go wild. You can become rich just by sitting in the comfort of your living room. Why do you love forex market? Share your experience in the comments.

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