If you want to learn how to trade in the Forex market, you need to understand how it differs from traditional markets. The world’s currencies trade on the foreign exchange, or Forex market. With more than $US3 Trillion traded every day, Forex is the largest tradable market in the world. Of that $3 trillion, most trades are speculative and therefore any actual movement of currency is minimal. Given that trading in the Forex market is mostly speculative, having the right education and research tools becomes increasingly important.
The Forex market is different from the stock market because it doesn’t trade on a central exchange. Instead, the interbank market is where transactions occur. This allows any two parties to make a trade without going through an exchange. The main centers or locations for trade are New York, Sydney, Tokyo, London, and Frankfurt. This means that the Forex market is accessible 24/7 for five days of the week. A trade in Forex is exchanging one currency for another. The two currencies being If two currencies are traded, it’s called a cross (e.g. Yen/GB Pound). The most frequently traded crosses are EUR/USD, USD/JPY, GBP/USD and USD.
The “spread” is one of the terms you’ll hear a lot in Forex trading. The spread refers to the difference in the selling price and buying price, or, in other words, the “Bid” and the “Ask” price. The currency pair you’re trading will determine the difference in the spread. Under normal conditions, major currencies will trade at around three pips or less. Which brings us to pips—this is another term used by Forex traders. A pip is the smallest unit of measurement that a currency can move. The quote may fluctuate. To explain further, if the buying price of EUR/USD is 0.9873 and the selling price is 0.9876, there would be a differential, or “spread,” of 0.0003.
Although the basics of the foreign exchange market are easy to understand, it can become a confusing and complex market. If you want to be successful in Forex, take the time to learn how to trade the Forex market correctly. Get Forex training classes, or trading tutorials to increase your knowledge. Forex will be less frustrating if you have a good understanding. Without a fundamental education, mistakes can cost you a lot