Understanding The Online Foreign Exchange Market
By Ultimate Trading
How You Can Make A Lot More Trading In The Online Foreign Exchange Market
FOREX, also known as the FX market or the
foreign exchange market, is largest and oldest financial market
in the world. It is also the biggest and most liquid market in the
world, a market that runs 24/5, circling the globe with financial
There has been some sort of online foreign exchange for as long as
people have needed to exchange currencies to do business.
Technically, if you are a tourist travelling in a foreign country
and you use a travelers check to pay for a transaction, you are
engaging in online foreign exchange. But traders are not interested
in that type of online foreign exchange. They are concerned with
trading online foreign exchange, which occurs when one currency is
traded for another on the market purely to make a profit.
In the past, online foreign exchange trading was limited to banks,
major currency dealers and occasionally to very large speculators.
Only these groups were able to take advantage of the currency
market's fantastic liquidity and the strong trending nature of many
of the world's primary currency exchange rates. However; recent
technological advancements and the development of various online
trading platforms have made it possible for small traders to take
advantage of the many benefits of online foreign exchange trading.
Online foreign exchange market brokers are now able to break down
the larger sized inter-bank units and offer individual traders the
opportunity to buy or sell any number of these smaller units. These
brokers give any size trader, including individual speculators or
smaller companies, the option to trade at the same rates and price
movements as the big players who once dominated the online foreign
Transactions on the
foreign exchange market are performed continuously by dealers at
major banks or at online foreign exchange brokerage companies around
the world. Online foreign exchange is a part of a world-wide market,
and it is active 24 hours a day. Dealers at major institutions work
24/5 in three different shifts. Traders may place orders with
brokers for overnight execution, without waiting for the opening of
Because of this continuous activity, price movements on the online
foreign exchange market are very smooth, without the gaps that occur
on the stock market. The daily turnover on the online foreign
exchange market is somewhere around $1.2 trillion, so there is never
any danger of an investor being unable to enter and exit positions
whenever they want to. The fact is that the online foreign exchange
market never stops. Even on September 11, 2001 you could still get
your hands on two-side quotes on currencies.
These currencies are on a floating exchange rate, and they are
always traded in pairs such as Euro/Dollar, or Dollar/Yen. About 85%
of all daily transactions involve trading of the major currencies.
Four major currency pairs are usually used for investment purposes.
They are: Euro against US dollar, US dollar against Japanese yen,
British pound against US dollar, and US dollar against Swiss franc.
They appear on the market in this form: EUR/USD, USD/JPY, GBP/USD,
and USD/CHF. As a note you should know that no dividends are paid on
If you feel one of the currencies in the pair you are trading in is
undervalued, you can buy more of that currency (by selling the
other). If everything goes as you expect, you later sell back the
currency you bought (buying the currency you sold in the beginning)
for a profit. Trading on online foreign exchange utilizes margin in
such a way that an individual trader is able to profit well from
trades such as these. The online foreign exchange market is one
where high profits are accessible to all types of traders, and the
market is also big enough to ensure that there will almost always be
a good trading opportunity.
When you compare them, you will see that the currency futures market
is only one per cent as big as online foreign exchange. In addition,
currency trading is not centred on an exchange, unlike the futures
and stock markets. Trading moves from major banking centres of the
U.S. to Australia and New Zealand, to the Far East, to Europe and
finally back to the U.S. it is truly a full circle trading game.
As you can see, the
foreign exchange market has come a long way. Being successful at
it can be intimidating and difficult when you are new to the game.
But once you understand the market, you will be able to realize your
potential to be a highly profitable online foreign exchange trader.
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