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How does forex trading work?

A forex trade takes place when a market participant buys one currency in exchange for another (e.g. buy Japanese Yen in exchange for US Dollars). All trades are executed through a forex broker or dealer.

Why is forex so popular?

Forex trading is attractive because it offers unparalleled freedoms. It is the largest financial market in the world .A forex trader can live anywhere as long as he/she is within reach of the internet. Work from home or office. Trade while travelling A forex trader can usually choose his/her own hours to work since the global foreign exchange market is open 24-hours a day.

Where is FOREX located?

Forex trading is not managed through an exchange. Since transactions are conducted between two counterparts, the FX market is an inter-bank, or over the counter (OTC) market.

Who participates in the FX market?

Central banks, Interbank & Retail brokers, Hedge funds, Corporations, Speculators, international money managers, registered dealers, private investors and options and futures traders,.

What profit can Forex give me as an individual investor?

The trader having a relatively small amount of means can operate with market sums of hundreds of thousands dollars. For example, to execute a deal of $100 000 at 1% margin, it is necessary to fund your account with only $1000 deposit.

What are the most liquid currencies?

The most liquid currencies are the US dollar USD, Great Britain pound GBP, single European currency EUR, Swiss franc CHF, and Japanese yen JPY, which share the main volume of all the operations on the FOREX market.

How much money do I need to start trading Forex?

This depends on the Broker you decide to open your account with. A new participant should first practice with a free demo trading account where "pretend" money is used. When you feel ready to trade with real money means advisable minimum amount $2000.

What do the position names "long" (LONG) and "short" (SHORT) mean?

In slang of traders "to open a long position" means to buy the base currency and "to open a short position" means to sell the base currency. For example, the trader has bought Euro 100,000 for Dollars, i.e. has opened a long position on EURO. BUY 100,000 EUR/USD - a long position on euro. SELL 100,000 EUR/USD - a short position on euro.

How much money can I make daily or weekly?

You can start off modestly and increase it as you gain more experience and confidence. Because the Forex market is so big (recent estimate about 4.3 trillion dollars traded daily) it has the capacity to give you all the things you want out of life.

Are profits guaranteed?

The market guarantees price movements up or down. Market investors always have freedom of choice, whether to stay in and ride a favourable market, or to cut their losses on adverse trades and live to fight another day.

What Do You Need to Know Before Trading in Foreign Currency?

Before trading in the Forex market, it is essential that you spend more time learning the terminology, charting techniques, technical analysis interpretation, and secrets of successful traders.

FX Jargon

Every discipline has its own jargon, and the currency market is no different. Here are some terms to know that will make you sound like a seasoned currency trader:
Cable, sterling, pound - alternative names for the GBP.
Greenback, buck - nicknames for the U.S. dollar.
Swissie - nickname for the Swiss franc.
Aussie - nickname for the Australian dollar
Kiwi - nickname for the New Zealand dollar.
Loonie - nicknames for the Canadian dollar.

What is Fundamental Analysis?

Fundamental analysis refers to the strategy of understanding the countries currency you are trading by looking at it's economic strengths, key indicators, GDP, and capital flows. Trade deficits and flows are also very important in fundamental analysis for Forex.
It is an alternative to technical analysis, which relies on charts to spot trends.
Most traders use either fundamental or technical analysis in trader, and the two camps argue as to which approach is best.

What is Technical Analysis?

Technical analysis is an alternative trading technique to fundamental analysis, and refers to the process of using charts and graphs to spot trends in currency prices.
The most often used technique is determining the market cycle - which is how long the currency takes to move from a low to a high and back again. However, technical analysis can be a haven for number crunchers - as it can get as complex as using Fibonacci numbers to anticipate changes in price trends.

What is Forex Scalping?

Scalping refers to the practice of opening and closing a position in seconds - or minutes at the longest. If done right, scalping reduces exposure risk, even though it is done at higher rates of leverage.

How to Limiting Your Risk?

Leveraged trading brings either big rewards or big risk, however, there are creative ways to limit your risks. One is by the use of stop orders, so that you can limit your losses. Another is by using the time honored technique of hedging. In finance, "hedging" is a strategy used to minimize exposure to an unwanted risk.

What is Margin?

Margin is a performance bond that insures against trading losses. Margin requirements in the FX marketplace allow you to hold positions much larger than the asset value of your account. If funds in your account fall below margin requirements, the system will close all open positions. This prevents your account from falling below your available equity, which is a key protection in this volatile, fast moving marketplace.

Can I lose more than I invest in Forex?

No. The broker won't allow you to lose more than the available funds on your trading account. It will simply close your losing position when the resulting account balance becomes too close to zero.