How To "Start Trading The Forex Market"
The Foreign Exchange market (also referred to as the Forex or FX market) is the largest financial market in the world, with over $1.5 trillion changing hands every day.
That is larger than all US equity and Treasury markets combined!
Unlike other financial markets that operate at a centralized location (i.e. stock exchange), the worldwide Forex market has no central location. It is a global electronic network of banks, financial institutions and individual traders, all involved in the buying and selling of national currencies. Another major feature of the Forex market is that it operates 24 hours a day, corresponding to the opening and closing of financial centers in countries all across the world, starting each day in Sydney, then Tokyo, London and New York. At any time, in any location, there are buyers and sellers, making the Forex market the most liquid market in the world.
Traditionally, access to the Forex market has been made available only to banks and other large financial institutions. With advances in technology over the years, however, the Forex market is now available to everybody, from banks to money managers to individual traders trading retail accounts. The time to get involved in this exciting, global market has never been better than now. Open an account and become an active player in the largest market on the planet.
The Forex Market is very different than trading currencies on the futures market, and a lot easier, than trading stocks or commodities.
Whether you are aware of it or not, you already play a role in the Forex market. The simple fact that you have money in your pocket makes you an investor in currency, particularly in the US Dollar. By holding US Dollars, you have elected not to hold the currencies of other nations. Your purchases of stocks, bonds or other investments, along with money deposited in your bank account, represent investments that rely heavily on the integrity of the value of their denominated currency the US Dollar. Due to the changing value of the US Dollar and the resulting fluctuations in exchange rates, your investments may change in value, affecting your overall financial status. With this in mind, it should be no surprise that many investors have taken advantage of the fluctuation in Exchange Rates, using the volatility of the Foreign Exchange market as a way to increase their capital.
Example: suppose you had $1000 and bought Euros when the exchange rate was 1.50 Euros to the dollar. You would then have 1500 Euros. If the value of Euros against the US dollar increased then you would sell (exchange) your Euros for dollars and have more dollars than you started with.
Example:
You might see the following:
EUR/USD last trade 1.5000 means
One Euro is worth $1.50 US dollars.
The first currency (in this example, the EURO) is referred to as the base currency and the second (/USD) as the counter or quote currency.
The FOREX plays a vital role in the world economy and there will always be a tremendous need for the exchange of currencies. International trade increases as technology and communication increases. As long as there is international trade, there will be a FOREX market. The FX market has to exist so a country like Germany can sell products in the United States and be able to receive Euros in exchange for US Dollar.
Why is FOREX trading so popular?
Because you can trade from anywhere. From your kitchen table, bedroom, garage or from the nearest Starbucks coffeehouse ( most of them have wireless Internet connection).
If you have or like to travel, take your laptop with you and you can trade the FOREX anywhere in the world where you have an Internet connection.
When you want to start trading the Forex Market nobody is asking you for a diploma, a formal license or a proof of how many hours you have spent studying the Foreign Exchange Market and/or Banking Industry.
FOREX Trading is Economical and Start-up Costs are Low!
You can open an account to trade Forex with as little as US$ 200 at he most brokerage firms.
I personally do recommend Fenix Capital Management, LLC, which offers a state of art Trading platform, that allows you to place orders directly by clicking on the chart.
The Main Benefits of Trading the FX Spot Market are:
YOU don't pay commissions or fees!
YOU can trade 24-hours a day !
YOU can trade up to 400:1 Leverage !
YOU can have FREE Streaming executable Price quotes and live charts!
It is important to know the differences between cash FOREX (SPOT FX) and currency futures.
In currency futures, the contract size is predetermined.
With FOREX (SPOT FX), you may trade electronically any desired amount, up to $10 Million USD.
The futures market closes at the end of the business day (similar to the stock market).If important data is released overseas while the U.S. futures markets is closed, the next day's opening might sustain large gaps with potential for large losses if thedirection of the move is against your position.
The Spot FOREX market runs continuously on a 24-hour basis from 7:00 am New Zealand time Monday morning to 5:00 pm New York Time Friday evening.
Dealers in every major FX trading center (Sydney, Tokyo, Hong Kong/Singapore, London, Geneva and New York/Toronto) ensure a smooth transaction as liquidity migrates from one time zone to the next.
Furthermore, currency futures trade in non-USD denominated currency amounts only, whereas in spot FOREX, an investor can trade in almost any currency denomination, or in the more conventionally quoted USD amounts.
The currency futures pit, even during Regular IMM (International Money Market) hours suffers from sporadic lulls in liquidity and constant price gaps.
The spot FOREX market offers constant liquidity and market depth much more consistently than Futures.
With IMM futures one is limited in the currency pairs he can trade. Most currency futures are traded only versus the USD.
With spot FOREX, you may trade foreign currencies vs. USD or vs. each other on a 'cross' basis, for example: EUR/JPY, GBP/JPY, CHF/JPY, EUR/GBP and AUD/NZD
More and more well informed investor and entrepreneurs are diversifying their traditional investments like stocks, bonds & commodities with foreign currency because of the following reasons:
10 REASONS TO START TRADING FOREX!
More and more well informed investor and entrepreneurs are diversifying their traditional investments like stocks, bonds & commodities with foreign currency because of the following reasons:
1) FOREX is the largest financial market in the world.
With a daily trading volume of over $1.5 trillion, the spot FOREX market can absorb trading sizes that dwarf the capacity of any other market. In fact, when compared with the $50 billion daily market for equities or the $30 billion futures market, it becomes quickly apparent this gives you, and millions of other FOREX traders, almost infinite trading liquidity and flexibility.
2) FOREX is a True 24-hour market.
The FOREX Market never sleeps. Trading positions can be entered and exited at any moment around the globe, around the clock, 5.5 days a week. There is no waiting for an opening bell as in the case of trading stocks. It is a 24- hour, continuous electronic (ONLINE) currency exchange that never closes. This is very desirable for you if you want to trade on a part-time basis, because you can choose when you want to trade: morning, noon or night.
3) There is never a Bear Market in FOREX.
You can have access to a seamless exchange of currencies. Currencies trade in "pairs" (for example, US dollar vs. JPY (YEN) or US dollar vs. CHF (Swiss franc), one side of every currency pair (for example, USD/CHF) is constantly moving in relation to the other. Thus, when you buy a particular currency, you are actually simultaneously selling the other currency in that particular pair. As the market moves, one of the currencies will increase in value versus the other. Of course, it is up to you to choose the correct currency to be long ( you bought) or short( you sold).
4) High Leverage - up to 400:1 Leverage.
You are permitted to trade foreign currencies on a highly leveraged basis - up to 400 times your investment with Fenix Capital Management, LLC and with some other brokers.
Standard 100,000- US$ currency lots can be traded with as little as 0.25% margin, or $250.
Mini FX accounts are permitted to trade with just 0.25% margin, meaning, just $25 allows you to control a 10,000-unit currency position.
Futures traders, who are accustomed to margin requirements generally equal to 5-7%-8% of the contract value, will immediately recognize that the FOREX market provides much greater leverage, and for stock traders, who must post at least 50% margin, there's no comparison. If you're looking for an efficient use of trading , trade the Forex Market.
5) Price Movements might be Highly Predictable.
Currency prices in the FX market generally repeat themselves in relatively predictable cycles, creating trends. The strong trends that foreign currencies develop are a significant advantage for traders who use the "technical" methods and strategies.
Unlike stocks, currencies have the tendency to develop strong trends. Over 80% of volume is speculative in nature and, as a result, the market frequently overshoots and then corrects itself. As a technically-trained trader, you can easily identify new trends and breakouts, to enter and exit positions.
6) YOU don't pay commissions or fees to trade FOREX
When you trade FOREX, through Fenix Capital Management LLC (FCM) you can do it totally FREE of commissions and fees , regardless of your account size.
Fenix Capital Management LLC, requires a very low minimum amount to open a brokerage account, only US$ 200 and they do not charge commissions or fees to trade or to maintain an account, regardless of your account balance or trading volume.
7) YOU don't have to pay trading fees or exchange fees.
There are none of the usual fees, which futures and equity traders are accustomed to pay:
NO exchange or clearing fees,
NO NFA or SEC fees.
Because currencies trade over-the-counter (OTC), via a global electronic network, in FOREX, what you see on your trading screen, is what you get, allowing you to make quick decisions on your trades without having to worry or account for fees that may affect your profit/loss or slippage.
In the equity and commodity markets, you must pay both a commission and exchange fees. The over-the-counter structure of the FX market eliminates exchange and clearing fees, which in turn lowers transaction costs.
8) HOW to Forex brokers make money if they don't charge commissions?
Like all traded financial products, over-the-counter currency trading involves a bid/ask spread, which represents the prices at which your counterpart is willing to trade. Your broker will receive a part of this bid/ask spread.
Because the currency market offers round-the-clock liquidity, you receive tight, competitive spreads both intra-day and night. Stock traders can be more vulnerable to liquidity risk and typically receive wider trading spreads, especially during after-hours trading.
9) Market Transparency.
Market transparency is highly desired in any trading environment. The greater the market transparency, the more efficient the market becomes. Unlike other markets where transparency is compromised (like in the many recent scandals), FOREX markets are highly transparent (i.e., analyzing countries, and having access to real-time research / news, is easier than analyzing companies).
Because of this transparency, as an FX trader, you will be able to apply risk management strategies in accordance to your fundamental and technical indicators.
10) Instantaneous Order Execution
The FX market offers the highest level of market transparency out of all the financial markets. Because of this, order execution and fill confirmation usually occur in just 1-2 seconds.
In Forex, order execution is all-electronic and because you'll be trading via an Internet-based platform, instantaneous execution is routine.