Foreign Currency Market

The foreign currency market (the Forex market, also know by the term FX) is relatively unknown which is surprising because it is the largest financial market in the world and sees approximately 1.9 trillion US dollars worth of trade on an average day.

Everyone has heard of stocks and shares, probably even the futures market, but the foreign currency market is a relatively new phenomenon.

Until de-regulation in 1997, the foreign currency market was the domain of the banking fraternity and the elite in financial and business circles, but now with as little as $500 any individual can open an account and participate in the foreign currency market.

foreign currency market is such a lucrative and easy to understand market that many who used to trade stocks, bonds, commodities and futures have switched to trading nothing but foreign currency. More and more astute internet entrepreneurs are shunning the traditional financial markets and turning to foreign currency market.

Even Bill Gates and the world renowned trader Warren Buffet now trade currencies as part of their overall strategies.

As currency markets are some of the most volatile markets, many fundamental variables such as weather and war affect the price of the currency. However, since there is no single apparent reason much of the time for price movement, the fundamentals get discounted and one can use an almost purely technical approach to trading. This is why the foreign currency market is considered one of the most predictable trending markets that follows technical analysis methods more than any other market. These price movements are highly predictable, creating trends that can be anticipated when it comes to decide when to buy and sell.

With real estate, the prices must go up in order to make a capital gain. With the stock market, traders need stock prices to rise in order to take a profit. Unlike real estate or the stock market, which relies on property value or shares increasing in price to create profit, money can be made both on a rising and falling edges of the foreign currency market.

The foreign currency market is the best trending market as it keeps moving in the same direction (this can be UP or DOWN) over 78% of the time. You can sell a currency (go short) just as easy as you can buy a currency (go long). Currencies go up and down and you can trade either direction just as easily ensuring there is always plenty of trading opportunities. It is possible to strategically plan your market entry and exit levels and control exactly how much you profit or lose. Investors can even make a profit when they misjudge the market 50% of the time! Compare that to other types of investments.

The foreign currency market is also the most liquid market in the world. Many other forms of investing require tying your money up for long periods of time, and if you need to use the capital it can be difficult or impossible to access to it without taking a huge loss. Not so with foreign currency market; you have full control of your capital.

Entry orders are instant. There is no lag time in placing an order. Orders are processed instantly at the current market price, or the price at which you set the order to enter the market in the future.

All done electronically and considered an over-the-counter (OTC) market, foreign currency market is far easier and less risky than either the futures or the stock markets and far more liquid than the futures markets.

Quite easily, the foreign currency market dwarfs the stock market of any country. To illustrate, this is 30 times larger than all the US stock markets combined.

Currency brokers usually give their traders 100:1 leverage, meaning that if there is $1000 in ones account, they will let one control $100,000, which allows currency traders to reap large gains from relatively small price movements in the market.

In the foreign currency market, you pay NO commissions and NO exchange fees. This can add up to quite a significant overhead in other financial markets. Even when you use discount brokers, those fees add up. With the foreign currency market, since you deal directly with the market maker via a purely electronic online exchange, you eliminate both ticket costs and middleman brokerage fees. There is still a cost to initiating any trade, but the broker just takes a small difference between the bid price and the ask price as its fee for the transaction of a currency pair. Since the foreign currency market is very liquid, the spread between the bid/ask is very small. In the foreign currency market, you also do not have to worry about having a large sum of money in your account to sell your currency pairs. As a trader gains experience, a full service paid broker is no longer necessary.

On another note, in the stock trading world, you are flagged if you are deemed to be a day-trader. In other words, if a trader of stocks chooses to trade every day, he or she must have an account balance of 50,000 dollars to do so. There are no such restrictions when it comes to trading in the foreign currency market. If you work at night, you may trade in the daytime. For those that have jobs during the day, the foreign currency market is much more accessible as trading can be done at night or early in the morning before going to work. You simply trade according to the schedule that works best for you. As there is no central exchange and because it is a world market, foreign currency market can be done 24 hours a day, so it need not get in the way of your other business interests or social life.

Another advantage that the foreign currency market has over stocks is the advantage of trading focus; instead of having to choose between over 4,000 stocks you can deal with 7 main currency pairs. Any good business person knows that focussing on too many things is a recipe for financial disaster and this can hold equally true in the stock market. A stock trader also must grapple with the time issue doing research on all those potential stocks presents. It is also much easier to become familiar with 7 areas as opposed to 4,000. Focus is the name of the game.

So, where is the foreign currency market located? Well, unlike the stock exchanges of the world, the foreign currency market is a virtual market that is connected by the internet, phones and fax.

Most brokers offer a free demo version of their live software, easily downloaded and installed.

The wonderful thing about these programs are that they work exactly like the real versions, with buy/sell capability; real-time charting with data updates; several dozen indicators; live price feed or a minimal 10 second delay; a realistic $50,000 account with active profit and loss; open, pending and closed trades; and actual stop, limit and market trades. No account deposit is needed. Traders can practice trading tactics until confident and successful before they even part with a cent of their own money on the foreign currency market.

Unlike learning how to invest in the stock market, for example, where you have to pretend that someone will sell to you and that someone will buy from you, and that is not real at all, the foreign currency market is so liquid (instant buyers and sellers) that both the demo and real accounts behave exactly the same! What a great way to learn - when you switch to a real account, you can't even tell.

You can practice, using various proven techniques, with your demo account until you feel comfortable that you are consistently making profits.

Once you feel that you have been obtaining consistent trading results, you can start trading on the foreign currency market for as little as $500 dollars. There are two types of real accounts, a mini foreign currency market account and regular foreign currency market account. Most foreign currency market brokers offer 100:1 leverage which means in a mini account you can control $10,000 currency position with $100. In a regular account $1000 controls a $100,000 currency position. This provides great leverage and an extremely efficient use of trading capital.

Get ready for a life-changing adventure! Once you get a taste of making money on the foreign currency market by sitting in front of your computer monitor, there is no turning back. But the best part is, it can be fun and get you more involved in your own financial portfolio.

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