Over a Trillion Each Day!
Over a trillion dollars are traded in the Forex markets every day, making it one of the liquid and active exchanges today. T here are three major Forex exchanges, which are New York, Tokyo and London. Minor exchanges include Sydney and Frankfurt. To be a Forex trader, it is critical to keep updated about world events as trading in any exchange, and they all have different time zones of trading, is impacted by the news that was announced during previous exchange hours. Foreign exchange trading is heavily impacted by news events, and many news events occur each week. Many of these, such as Non-farm Payroll reports, come out at certain pre-set days of the month, but other currency news is spontaneous. That is why it is critical to keep stop losses in play with your trades as unexpected news is frequent.
While stock trading allows you to see total volume of orders that other stock traders have placed, that is not true in Forex trading. You can only see the trades being made at your broker, so you do not have the entire picture. Also, while insider trading is often discussed in the news with stocks, this illegal practice is not as prevalent with the Forex markets. But this is a highly disputed topic. The large institutional traders do have expensive Bloomberg feeds that do give them news information probably a few minutes or seconds prior to the release to the general markets.
Three Great Forex Forums
There are many forex trading sites, such as forex-tsd.com and forexpeacearmy.com that can help you with your trading. For beginners, babypips.com has free tutorials that will walk you through understanding currency trading and technical indicators. Most sites, especially broker sites, will have both trading calendars showing you when the foreign trading exchanges open and close, but will also show you monthly calendars detailing when various currency news reports will be released. While some people have made significant sums trading only news releases, it is becoming more and more difficult as brokers will widen their spreads during news releases preventing adequate order fills when news releases are made. Traders use both technical analysis (indicators) and fundamental analysis (news and country economic condition) to place trades. Both are highly significant to understand before entering this investment arena. Forex trading is very convenient.
What Are Currency Pairs?
You sign up with a broker, fund the account with as little as $100 dollars, decide on the leverage you want (you can control currencies that are anywhere from 50 to 400 times the value of your initial account balance), learn the trading platform your broker uses, and start placing electronic trades. There is no need to have an intermediary broker agent charging you fees to advise you, although managed Forex accounts are offered by most brokers. When you trade in Forex, you trade in currency pairs. All currency is pegged to the US dollar either directly or indirectly. For example, the USD/JPY pair is the US dollar traded in relation to the Japanese Yen. If you think the US dollar is going up in value in relation to JPY, you buy the USD/JPY pair. If you think the US dollar is going down in relation to the value of Yen, you sell the USD/JPY pair. Other currency pairs, called cross pairs, do not directly have the US dollar traded in the pair. For example, GBPJPY is the British pound and Japanese yen pair. While the US dollar is not directly traded in this pair, the exchange rate value between GBP and JPY is determined by first determining the value between GBP and the US dollar, and the JPY and the US dollar, and these two values are compared to get the GBP/JPY trading value.
While the US, Britain and Japan are probably the largest countries that influence the Forex markets, Australia and Canada are important participants in these markets and China will be a force in the future. Large financial institutions, including banks and financial services providers, have a large influence on the markets. These institutions use Forex to hedge their funds, and a large order can send your trade into a nose dive. Also, interest rate decisions by these institutions, as well as domestic monetary decision by each country, will greatly impact the Forex markets.