What's Forex?
"Forex" stands for foreign exchange; it's also known as FX. In a forex trade, you buy one currency while simultaneously selling another - that is, you're exchanging the sold currency for the one you're buying. The foreign exchange market is an over-the-counter market.
Currencies trade in pairs, like the Euro-US Dollar (EUR/USD) or US Dollar / Japanese Yen (USD/JPY). Unlike stocks or futures, there's no centralized exchange for forex. All transactions happen via phone or electronic network.
Who trades currencies, and why?
Daily turnover in the world's currencies comes from two sources:
* Foreign trade (5%). Companies buy and sell products in foreign countries, plus convert profits from foreign sales into domestic currency.
* Speculation for profit (95%).
Most traders focus on the biggest, most liquid currency pairs. "The Majors" include US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. In fact, more than 85% of daily forex trading happens in the major currency pairs.
The world's most traded market, trading 24 hours a day
With average daily turnover of US$3.2 trillion, forex is the most traded market in the world.
A true 24-hour market from Sunday 5 PM ET to Friday 5 PM ET, forex trading begins in Sydney, and moves around the globe as the business day begins, first to Tokyo, London, and New York.
Unlike other financial markets, investors can respond immediately to currency fluctuations, whenever they occur - day or night.
Analysis of the foundations for technical analysis
Dealers take in cash decisions using both technical factors and economic fundamentals. Professional traders and uses diagrams and lines of direction and rates of support and resistance and many of the patterns and mathematical analysis to identify trading opportunities. The analysis of the foundations users predict price changes through the interpretation of a variety of economic data, including news, indicators and reports issued by the Government, and even rumors.
Nevertheless, there are fluctuations in prices the most upon the occurrence of unanticipated events. And can range event between the central bank to raise interest rates on local currencies and the political outcome of the election or even the outbreak of war. However, it is often subject to market expectations that surround
The event and not the event itself.
Factors affecting the market
Currency prices are affected by a variety of economic and political conditions, most importantly interest rates, inflation and political stability. Moreover, governments are sometimes in the foreign exchange market to influence the value of their currencies, either by flooding the market in their local currencies in an attempt to reduce the price or, on the contrary, through the purchase in order to raise the price. This is known as the term central bank intervention. And can lead any of these factors in addition to market orders to major fluctuations in exchange rates. However, it is impossible for any entity that "controls" alone in the market during any period of time, given the size of the forex market trading foreign currencies.
Methods of giving and pricing
Like all financial products, bids include the foreign exchange market "purchase price" and "selling price." The "purchase price" in the price which the trader wishes to buy (and clients can sell) the base currency against another currency. The "sale price" in the price at which the dealer from which to sell (and clients can buy) the base currency against another currency.
Is the U.S. dollar as the basis of transactions in the forex market usually represents the currency of the "basis" in quotations. This includes, in the "majors", the U.S. dollar / Japanese yen and U.S. dollar / Swiss franc and U.S. dollar / Canadian dollar. And is expressed as price quotations for these currencies and other currencies against the U.S. dollar as a unit against the other currency associated with it. Include exceptions to the bids based on the U.S. dollar both the euro and British pound (also known as sterling) and the Australian dollar. Presentations are the prices of these currencies in the form of foreign currency against the dollar compared to foreign currency against the dollar.
To clarify the process of trading foreign exchange market, study the following example:
Suppose that the current price for a pair of the euro dollar EUR / USD, supply / demand is 1.46190 / 1.46160 means that you can buy the euro at 1.46190 or sell a euro on the price of 1.46160.
Suppose also that you have decided that the euro is weak against the U.S. dollar. To implement this strategy, you will buy the euro (ie, selling the dollar at the same time), then wait for the rising price of EUR / USD.
You will deal the following: to buy 100,000 euros, it logically must be paid 146.190 dollars (1.46190 * 100.000). However, since the leverage is% 1, the amount of the reserve (margin) required for this deal is approximately $ 1,461.
They also expected the price of the euro against the U.S. dollar, reaching a rate of 1.46260 / 1.46230. And now to take profits and close the deal so you should sell 100,000 euros on the current price 1.46230 receive any $ 146,230.
Does all this mean you bought 100 thousand euros on the price of $ 146,190 at $ 1.46190. It is then sold 100 thousand euros on the price of $ 146,230 at $ 1.46230. Any difference to 4 points (ie, from 146,230 to 146,190 = 40 $).
Net profit is U.S. $ 40.
Forex market trading foreign currency
Is the foreign exchange market, and also referred to as the market, "Forex" (Forex) or market (FX), as the largest financial market in the world, more than the daily average volume of its business from U.S. $ 1.9 trillion - about 30 times the size of all stock markets America combined.
The "foreign exchange" in the purchase of one currency and selling another currency at the same time. And all currencies are traded together, for example: EUR / USD or USD / JPY.
There are two reasons to buy and sell currencies. Produces about 5% of the daily business of corporations and governments that purchase and sale of products and services in any foreign country, or that should be performed to transfer the profits to be achieved in foreign currency to their local currencies. The other 95% trading for profit or speculation.
With regard to the speculators, the best trading opportunities in the currencies most actively traded (and therefore most liquid), which is termed as "major currencies." The company is currently conducting more than 85% of the total financial transactions daily through the trading in major currencies, which include the U.S. dollar, Japanese yen and the euro and the British pound and Swiss franc, Canadian dollar and Australian dollar.
Begin the process of the daily trading of the forex market, which operates 24 hours a day in Sydney and moves around the world with the business day begins in each financial center, ranging from Tokyo to London and New York. In contrast to any other financial market, investors can respond to currency fluctuations caused by economic conditions, social and political as they happen - whether by day or night.
FX market is a market for treated outside the cabin (OTC) market or "between the banks," given the fact that financial transactions between the parties over the phone or through the web. Trading does not depend on the stock exchange as is the case in the stock markets and futures markets.
Forex News and Events:
Thin liquidity continues to be the dominating theme in FX markets and we wouldnt read too much into the current price action। The EURUSD traded in a 1।4306 to 1।4375 range, while the USDJPY slowly trended higher, moving back to 92।27 from 91.55. The heavy buying of commodity currencies against the JPY seen yesterday tapper off slightly today, but still was weighing on the Yen. The big news was Japanese Airlines ongoing bankruptcy concerns as shares continued to slide which weighing broadly on Asian equities. However, news that S&P rating agency stated that Japan's rating might be sliced if policy steps fail to stabilize debt and gradually lower levels of debt, failed to affect the markets. The S& P analyst was quoted in saying "fiscal policy needs to undergo major reforms, if the debt burden is to steady and then gradually diminish" and that "downward pressure" on the rating "could emerge if policy initiatives are seen as insufficient" to regulate the situation. While the comment seem to lack immediate punch, we still expect Japan's debt issues to come into play in 2010. The USDJPY traded up to 92.26 but back off a full assault on 92.35 critical resistance but with US 2s & 10s getting comfortable at these higher levels a weaker yen should be expected. The AUDUSD opened the Asian session around 0.8930 after shedding earlier gains due to the dramatic USD in late NY. Yesterday's US economic data was supportive of USD, as Case-Shiller home price index continued to improve for the 5th consecutive month, as well as a better than expected US consumer confidence at 52.9 in December vs. 50.6 in November. On the event calendar, Europe will be extremely light with the Eurozone M3 and Swiss December KOF leading indicator the focus. While in the US session, the only data release will be Chicago Purchasing Manager index, which markets expect a slight pullback to 55.1 from 56.1 last month.
FOREX
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