Brief Description of Forex Trading

  • The Basics of the Trading Game
  • Forex trading is ubiquitous in the business world. It can be seen in the media from TV, cable stations to online news sites and in financial-oriented websites and, of course, in Forex trading blogs. But to get to the basics of Forex trading is what this article is all about. Certainly, the topic can be seen in different media but not all people understand what Forex trading is and how it may change the lives of Forex trading risk-takers.

    Forex trading is not something that can easily get into as a venture as it certainly carries substantial risks. Though winning is part of Forex trading where traders can get profits out from the Tran

  • What is Forex Trading?
  • Forex trading is a method of financial trading in which one currency is purchased in exchange for the sale of another currency. For example, your US dollars can be exchanged in another currency, for instance Japanese yen or British pound.

    Foreign currency rates fluctuate at numerous times throughout the trading day, in some cases meaning large amounts of money are won / lost, dependant on how experienced and successful a trader you are. Supply and demand is one key factor which makes this type of trading one of the most volatile of all time. No doubt you’ve heard of these success stories of how Forex traders have earned millions of dollars each year in high volatile trading, it’s not as simple as people make it out to be. People compare Forex trading like gambling at an online casino establishment but the tactics involved are far from similar. Changes to the market happen quickly and in most cases without prior knowledge so it’s essential to establish the basics before trading in Forex for good.

    The exchange of money in Forex trading is common to many travelers who exchange the bills of their country of origin to the banknotes of a foreign country they are currently staying in. It is common knowledge that a country only accepts a certain currency for their businesses unless this country has common agreement with a certain country to accept a currency of another country in their business transactions. However, let us say an American traveler who wishes to purchase a product in a shop in Britain cannot use hi US banknotes. Thus, he would be compelled to exchange his American bills to British pound sterling.

    A US firm can take advantage of the Forex trading game by attaining relative profits if the revenue in the business transactions is used in Forex trading, wherein the British currency that it holds can be exchanged in the normal currency it uses for transactions and financial reporting at the foreign exchange market

    The foreign exchange market is a volatile type of financial market. The reason for its volatility is that in Forex trading, the value of a currency in relative value of another currency continuously changes due to the ongoing demand and supply. Forex trading happens 24/7 except on weekends. Perhaps, the best part of this financial market is that it is highly liquid. Because the currencies are traded in volumes, traders in Forex trading can receive gains in cash once their currencies are exchanged in another currency on the spot unlike other financial markets such as stocks where investors will have to wait for a certain period to exchange the stocks into cash.

    Forex trading can be fun but it is not a trading game for all. As stated, it requires knowledge and an ample amount of it to participate in Forex trading. Perhaps, those who have considerable wealth and hedged currencies can partake in Forex trading. But one can still start if curiosity sets in. It is very advisable to learn first the basics of Forex trading though.

  • Why is Forex trading a game ?
  • Forex trading can have wins and losses and winners and losers. Thus, individuals considering partaking in Forex trading should open their minds for the possibility of losing but must have great aspiration for winning

    Just like any other kinds of game, Forex trading has rules, guidelines and a system. For Forex traders, they have to be armed with strategies and techniques to be able to participate in the game. Thus knowledge of Forex trading concerning fundamental and technical analysis is highly significant sections, losing money is also part of the game

  • The Basics of Forex Rates
  • The foreign exchange market is a widely distributed financial market that deals with the trading of different currencies. In this kind of global financial market, forex rates are always involved. To the people who are engaged or who are still planning to engage in foreign exchange trading, knowledge on forex rates is really of prime importance because they are the ones that are primarily and mainly tackled in the forex market. Basically, forex rates are exchange rates between currencies involved. Forex rates then are those in which one currency is exchanged to another currency. Forex rates and even other exchange markets are very important for the global economy because they help in businesses involving international trades and investments. Since the term “rate” refers to ratios and proportions, forex rates then mean the value of one currency against another currency. To better understand this, an example is given. Say for instance you have 10EUR then it was exchanged for 100USD. The foreign exchange rate then is that 1EUR = 10USD. To put it into perspective, forex rates are simply the value of a certain curreny as compared with another currency. Other money dealers usually have different forex rates as compared with that of the retail market. This is because they also incorporate their profit in trading in order to have higher gains. Otherwise, going into forex market would be useless. Many people actually wonder why forex rates keep on changing. As people may have observed, forex rates can never be static for a number of days. Every single day.

    Forex rates either go up or down depending on the economic status of a certain nation.

  • Why Forex Rates Change ?
  • There are so many things that you have to go in order to understand the reasons behind changes in Forex rates. In economics, different factors have direct or indirect influences over the change of certain economic events. In the case of Forex rates, six identified factors lead to the changes of Forex rates from one currency to another. Each of the factors is discussed in the following:

    • Purchasing Power: This theory is believed to be one of the most important reasons why values of currencies as compared with other currencies fluctuate, thus, the change in Forex rates occur over time. Some theorists believe that the value of goods should be of the same amount in different countries. Following this theory, countries that sell goods at a cheaper price shall increase the value of their currency as compared with those countries that sell the goods at a higher price. This then would lead to the strengthening or even weakening of a certain currency against another currency.
    • Interest Rates: The next reason why Forex rates change is due to the changing interest rates. Relative interest rates refer to the size of the disparity between the agreed or the real interest rates against the inflation rate. If interest rates increase, then the Forex rates also have to adjust in order to compensate such increase.
    • Trade Imbalances. If there is a trade deficit between two countries, Forex rates become unstable. Forex rates start to change because there will be an imbalance of currency reserves between the countries involved due to the fact that there was a deficit in trading between them.
    • Unstable Government. As always, the economy’s strength will always be affected by politics. If a government that is true run a country, it builds confidence to its people as well as its foreign investors. With this, the country’s economy rises, thus, Forex rates also strengthen. However, if the government is so ill, the economy also becomes unstable leading to the weakening of Forex rates.
    • Interventions of Government. The value of a currency is so significant for the government in order to build a wealthy country and a wealthy people. If the government is able to intervene with the economic demands of foreign investors, like the production of domestic goods for export, the economy will also rise, therefore leading to a change in Forex rates.

    Speculators: Last on the list are the speculators. They are those who have the purchasing power to buy or sell any currency. Their actions usually have significant effects on the fluctuations of Forex rates because again, they are the ones who purchase or sell the currencies.

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