Monday, August 31, 2009

Basic Knowledge on Forex Exchange Trading

As we know that the ‘Forex’ mean the Foreign Exchange market, and other people may call it ‘FX’ or ‘Spot FX’ or ‘Spot’ in the trading financial market, and over $3 trillion transaction per day. So compare to New York Stock Exchange transaction around $30 billion per day, then you can see the huge Foreign Exchange potential value.


What we use to trade in Forex?

Simple answer, is ‘Money’. There is no physical goods for you to buy and sell through a broker or dealer, but we are using our money to buy currency, and the price for the currency is directly reflected by the economic prediction and current situation for those country currency.

The exchange rate of the currency can consider as country economy compared to another countries economy.

We used to trade the Forex Over-The-Counter (OTC) or so called ‘Interbank’ network without a physical location, as all the transactions are been transferred electronically through ‘Interbank’ network daily over 24 hours continuously.

You need to know the Spot Market mean any trading market deal at the current price of the financial instrument. And the Forex OTC market mean the participants will determine who they want to trade with and depend on the trading conditions, prices and reputation of the trading counterpart with biggest and most popular financial market in the world.

There are few reasons that people like Forex trading:-

  • No brokerage fees or no clearing fees or no exchange fees or no government fees. As they are using bid-ask spread to compensated for their services. The bid/ask spread usually is less than 0.1 percent, and even with the larger dealers, the spread may as low as 0.07 percent depend on your leverage.
  • You not need to deal with any middlemen and you just need to trade directly in the online Forex brokers based on the market price.
  • There is no fixed lot size for the spot Forex, as you can determine by your down lot size.
  • You not need to wait till the market to open then only can trade, as this is almost 24 hours trading around the clock.
  • You not need to worry that someone can control the market as the Forex  market is so huge and many participants transact over the world at the same time and not limit on your country only.
  • Leverage. You can keep your risk as minimum to make a nice profits as you can control with a small margin deposit to get a larger total contract value. Example, the brokers offer 200 to 1 leverage, mean with a $50 dollar margin deposit to allow you buy or sell $10,000 worth of currencies, and $500 can let you trade $100,000 dollars and so on. Mean more margin deposit, then you can trade and gain more, but without proper planning, it will make you lose a lot too in this case.
  • The Forex daily transaction so huge over the world, and it almost allow you to buy and sell just with a click of mouse to done the deal through online transaction, and won’t let you ‘stuck’ in a trade. If you are busy, then you even can set the desired profit level (with limited order), or close the trade at certain amount in the online Forex broker system to auto transact for you.
  • A lot of online Forex broker systems provide the free ‘demo’ account for you to practice the Forex trading before you jump into it directly using your real money. You can use their services (news, charts, reports, forum) till you really familiar and has confident, then you can open a live trading account to start your Forex trading. Practice make perfect!
  • Startup cost for the Forex trading is lesser than the trading stocks, options or futures. Online Forex brokers offer ‘micro’ and ‘mini’ trading accounts for us to start-up as minimum as $300 or less.


What type of currencies that we can trade?

Most of the people trade below currencies (with currency symbols).

Country Currency Nickname Symbol Market Turnover Rate
United States Dollar Buck USD > 86%
Euro Members Euro Fiber EUR > 37%
Japan Yen Yen JPY > 16%
Great Britain Pound Cable GBP > 15%
Switzerland Franc Swissy CHF > 6%
Australia Dollar Aussie AUD > 6%
Canada Dollar Loonie CAD > 4%
New Zealand Dollar Kiwi NZD > 2%


You can trade in online Forex brokers system anytime anywhere as the Forex market is almost open 24 hours by 7 days and follow the sun around the world. Only a few hours gap during the weekend, but still allow to trade it at your morning, noon or night time zone. You just need to remember below Forex market time zone sequence in GMT and plus your own local time zone to get your local time.

Forex Time Zone GMT
Tokyo Open 0:00
Tokyo Close 9:00
London Open 8:00
London Close 17:00
New York Open 13:00
New York Close 22:00

What is minimum requirement to start the Forex trading?

We all just need to have a computer and a stable high speed Internet line to get connected to online Forex Broker system. With the latest technology, you can have a computer Netbooks and a mobile phone to get online and transact it anytime anywhere.


How much I need to get it started on Forex trading?

Although some of the online Forex brokers trading can allow you to open an account with minimum deposit of $300 or less, but propose you to have at least $1000 to start as a ‘micro account’, or if you have more money then can start with $10,000 to get a ‘mini account’. Most of the online Forex brokers offer different level of services, and for example, micro account ($1000 or less) allow you trade $200,000 dollars and below currencies transactions to gain more profit.


Forex Trading! Money Exchange!