The Business Of Trading Currencies And How You Can Make Money

March 26, 2012 by Leo D. Endo  
Filed under Finance

When the market is mentioned, what often comes to mind is a place where products and services are exchanged for money. There is however another kind of market and that is the foreign exchange market. What goes on here is trading currencies, which are bought and sold in a money market that spans the whole globe.

The foreign exchange market, commonly abbreviated to the forex market, is a market where money is traded for money. The trade is founded on speculation about the rates at which various monies will exchange. The target is to trade as much of the high value currencies as possible and sell it for a profit to those who are in need of it.

Fore is carried out via a large network that links banks, companies who trade in international currencies and individuals who are seeking to trade one kind of currency for another. These are exporters, importers, international corporations, day traders or short-term players, long-term international investors and dealers whose business is specifically buying and selling currencies. Apart from trading purposes, there are also those who play in the Forex market with the aim of reducing the risk posed by currency movements upwards and downwards that would compromise the value of their investments.

Those who are in the foreign exchange market stay updated on the prevailing exchange rates and communicate the same to each other over the internet, faxes and telephone calls. This network has no focal exchange for currencies being traded. Therefore, the Forex market is referred to as an over the counter.

One main characteristic of the currency exchange market is that it is a very liquid market. This means that there is never a lack of buyers and sellers to buy and sell the currency one wants to trade in. This means that it is easy to make a quick buy or sale. This translates into very high daily sales averages, which was put at $1.9 trillion in April 2004.

Another feature of the Forex market is that it is never shut, especially in leading financial capitals like New York, Tokyo and London. This is important for traders who can immediately react to dips and rises in currency values to avoid or reduce losses and exploit gains.

The last characteristic of the Forex market is that it is a field whose operation costs are quite low, regardless of the substantial daily averages. Trading currencies costs a trader a spread and brokers commissions which vacillate between $20 to about $150 depending on the trading volume. Traders also have the option to trading currencies directly in the market which cuts their costs further as they only have to pay the spread and the trading price at which a trader will buy currency.

What would a very effective forex trading tactic bring to your fx trading business instantly? Every type of forex trading strategy that is introduced must be scrutinized really well.


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