What is Forex?


The Forex market is very similar to the U.S stock market but instead of trading stocks the Forex market trades currency. Forex trading is one of the many forms of trading that you can do as an investor but is not for everyone. It takes serious commitment, education and discipline to become a successful Forex trader.

Forex is a term that stands for Foreign Exchange. Unlike the stock market, in the Forex markets, you do not trade ownership in a business. Rather, you are trading the value of money, based on the ups and downs of the currencies of the market. Forex market is the largest market in the world. It is larger than any of the stock markets.

Each day, more than three trillion United States dollars trade on the Forex market. This outstanding amount of activity can be a good thing, but it can also be quite worrisome, depending on whom you speak with. It is important to know that much of the Forex market trading that occurs is speculative trading. It is not just a market based on people changing money hands based on their needs to have another currency. In fact, only a very small portion of Forex trading is in fact from the government or companies out there who need to trade currency for their needs. Most of the trading does not occur for conversion, but for profit of investors.

The risk levels involved in Forex are easily overcome by the amount of money that can be made in this market place in a single given day. However, it is very important for you to understand the market well before you jump into it. Otherwise, you could lose a great deal of money and your time in the process. It is recommended for anyone starting in Forex to open a practice account with a Forex broker. Putting into practice what you have learned using a practice account can help you fine tune your trading style. However you must know a practice account won’t give you all the knowledge you need to become successful. Some might disagree with me but i believe discipline is not obtainable with a practice account. In order for you to obtain the discipline you need to become successful you need to open a live micro account. This micro account will give you real exposure to the market without having to risk a large amount of money and over time will allow you to become better disciplined.

In Forex you have the ability to trade 24 hours a day, six days a week. There are three major sessions of the Forex market: London, US and Tokyo session. The busiest times are when the sessions overlap as traders can then purchase currencies from different continents. The Forex market of London is usually the most active as it involves many countries of the European Union. US market comes next, so the time when London session intersects with US session usually provides the biggest returns. Expert traders consider that 10 AM is the best time as this is the period when London market is preparing to close the trades and traders are getting ready to move to US market. This creates big swings in the currency prices thus opening great opportunities for profit.