Forex Trading Facts

This article will give you a brief description of what forex trading is, how it's done and what strategies you can apply on the market.

The goal of all players involved in forex trading is to make money by buying a given currency when it's under-valued, because they anticipate that it's price will go higher compared with the currency they sold for it. The characteristics which make Forex a truly unique market is that it's non-stop during the business days and it's the largest financial market in the world with an estimated turnover of $1.5 Trillion a day. The market doesn't stop Monday till Friday, because as the Asian market closes, the European one opens, then comes the US one.

Since forex is a financial market, it's no wonder that currencies are the most important asset in it. Brokers deal with currency pairs, denoted by XXX/YYY, based on the international three letter codes of the currencies. When you work with a given currency pair, like USD/EUR, you actually buy Euros by selling dollars. Reports show that the US dollar is the most widely used currency as over 80% of all transactions are done against the USD. The next popular currencies are the Euro (EUR), Pound Sterling (GBP), Japanese Yen (JPY), and Swiss Franc (CHF), therefore brokers call them "The Majors."

But as profitable as Forex is, it seems that only the big corporations are on the receiving end, because only 5% of all forex brokers are able to achieve consistent profitable results. To be amongst those 5%, one needs a strong knowledge and financial education, proven strategy, trading system plus the mentality of a winner. Understand that there is always some degree of risk involved and you shouldn't expect to win all the time as unexpected events will always occur. They factors which can have a strong effect on the currency movements are political news and situations, government reports and economic trends.

Perhaps the biggest advantage of forex trading is that it has no borders, individuals from all around the world can participate in it, regardless of the their nationality or geographical location. Opening a Forex account has never been easier than it is now, considering the opportunities available online. There are hundreds of different websites where you can open a FX account and start playing on this global market.

To increase your chances of success, you must have a certain strategy when trading. The Forex market could be very tricky and if you are absolutely new to it, it's recommended that you open a demo account to gain some experience. Some strategies can be based on mathematical analysis of the forex charts for a given currency pair. Others are based on more obvious factors such as political news and situations. The best idea is to combine both methods but no matter how good a given strategy is, unexpected events will always occur at one moment or another.

To start trading on the FX market, you need to set up an account with an official broker. There are plenty of brokers available on the Internet, so choosing the best one will require a little research from your end. Different brokers have different terms and conditions for opening an account. Some of them require a minimum deposit between $400-$2000, while others don't.

Forex websites require you to register for an account and upload funds (using a credit card, or bank wire), after doing that, you will receive access to their online trading system with the username and password you specified during the registration process. Although the trading platforms vary with their menus, options and features, they all serve the same goal. Therefore, the best idea is to open a demo account to gain some experience.

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Steve Gargento is an expert when it comes to Forex analysis. Author - Steve Gargento.
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