Monday, July 21, 2008
Forex is the abbreviation for foreign exchange. It is also sometimes shortened again to just FX. Foreign exchange, forex, FX and currency all refer to the $1.6 trillion per day market where currencies are exchanged for each other. The forex market's size dwarfs all of the stock and commodity markets combined.learn more....
The forex markets are a true electronic or over-the-counter exchange. There is no physical or central forex exchange location. The forex market is comprised of a global network of banks, corporations and individuals who are buying and selling currencies 24 hours a day, except on weekends.for more informations.....
Forex trading follows the sun around the globe. The most active exchange centers are in Tokyo, Singapore, London and New York. When Asian trading session ends the European session begins and when the European session ends the North American session begins and so on.
The United States Dollar (USD) is the most actively traded currency. The (USD) is then followed by the Eurocurrency (EUR), the Japanese Yen (JPY), the British Sterling (GBP), and the Swiss Franc (CHF) and the Australian Dollar (AUD). The most actively traded currencies are often referred to as the majors.read more.....
The currencies are traded against each other in one simultaneous transaction. For instance, you may believe that the EUR will strengthen versus the USD over the next few days. You might place an order to Buy 1 EUR/USD. Buying one EUR/USD leverages $100,000 worth of currency. To exit this trade you would Sell 1 EUR/USD and your trade would realize a loss, gain or break even depending on the currencies' movements versus each other.for more informations...
Now let's presume that you believe that the JPY will strengthen against the USD. You might sell 1 USD/JPY which leverages $100,000 worth of currency. Please not that the most valuable currency is listed first in the trade first. In other words, you would not buy 1 JPY/USD to accomplish your speculation that the JPY will strengthen versus the USD. The first currency is referred to as the base currency and the latter is called the counter or quote currency.
The forex markets trade in pips. A pip is 1/100th of 1% or $10. Like all financial products, forex quotes include a "bid/ask" spread. The "bid" is the price at which the market maker is willing to buy (and you can sell) the base currency in exchange for the counter currency. The "ask" is the price at which the market maker is willing to sell (and you can buy) the base currency in exchange for the counter currency. The difference between the "bid/ask" spread is how the market maker and the broker are compensated for their services. For instance, if you bought 1 EUR/USD at 1.3000 and the "bid/ask" pip spread is 3 pips. That means that you will not be at break even until the spread goes to 1.3003. At 1.3004 you will have a profit of $10. If you sell for anything less than 1.3003 you will lose $10 per pip.read more....
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