Getting Started.pdf

What is FOREX?

The Foreign Exchange market, also referred to as the "FOREX" or "Forex" or

"Retail forex" or "FX" or "Spot FX" or just "Spot" is the largest financial market

in the world, with a volume of over $4 trillion a day. If you compare that to the $25

billion a day volume that the New York Stock Exchange trades, you can easily see

how enormous the Foreign Exchange really is. It actually equates to more than three

times the total amount of the stocks and futures markets combined! Forex rocks!

What is traded on the Foreign Exchange market?

The simple answer is money. Forex trading is the simultaneous buying of one

currency and the selling of another. Currencies are traded through a broker or

dealer, and are traded in pairs; for example the euro and the US dollar (EUR/USD)

or the British pound and the Japanese Yen (GBP/JPY ). Because you're not buying

anything physical, this kind of trading can be confusing. Think of buying a currency

as buying a share in a particular country. When you buy, say, Japanese Yen, you

are in effect buying a share in the Japanese economy, as the price of the currency is

a direct reflection of what the market thinks about the current and future health of

the Japanese economy.

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In general, the exchange rate of a currency versus other currencies is a

reflection of the condition of that country's economy, compared to the

other countries' economies.

Unlike other financial markets like the New York Stock Exchange, the Forex spot

market has neither a physical location nor a central exchange. The Forex market is

considered an Over-the-Counter (OTC) or 'Interbank' market, due to the fact that

the entire market is run electronically, within a network of banks, continuously over

a 24-hour period.

Until the late 1990's, only the "big guys" could play this game. The initial

requirement was that you could trade only if you had about ten to fifty million

bucks to start with! Forex was originally intended to be used by bankers and large

institutions - and not by us "little guys". However, because of the rise of the

Internet, online Forex trading firms are now able to offer trading accounts to 'retail'

traders like us.

All you need to get started is a computer, a high-speed Internet connection, and the

information contained within this site.

What is a Spot Market?

A spot market is any market that deals in the current price of a financial instrument

Which Currencies Are Traded?

The most popular currencies along with their symbols are shown below:

Symbol

Country

Currency

Nickname

USD

United States

Dollar

Buck

EUR

Euro members

Euro

Fiber

JPY

Japan

Yen

GBP

Great Britain

Pound

Cable

CHF

Switzerland

Franc

Swissy

CAD

Canada

Dollar

Loonie

AUD

Australia

Dollar

Aussie

NZD

New Zealand

Dollar

Kiwi

Forex currency symbols are always three letters, where the first two letters identify

the name of the country and the third letter identifies the name of that country’s

currency.

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When Can Currencies Be Traded?

The spot FX market is unique within the world markets. It’s like a Super Wal-Mart

where the market is open 24-hours a day. At any time, somewhere around the world

a financial center is open for business, and banks and other institutions exchange

currencies every hour of the day and night with generally only minor gaps on the

weekend.

The foreign exchange markets follow the sun around the world, so you can trade

late at night (if you’re a vampire) or in the morning (if you’re an early bird). Keep

in mind though, the early bird doesn’t necessarily get the worm in this market - you

might get the worm but a bigger, nastier bird of prey can sneak up and eat you

too…

Time Zone

New York

GMT

Tokyo Open

7:00 pm

0:00

Tokyo Close

4:00 am

9:00

London Open

3:00 am

8:00

London Close

12:00 pm

17:00

New York Open

8:00 am

13:00

New York Close

5:00 pm

22:00

The Forex market (OTC)

The Forex OTC market is by far the biggest and most popular financial market in

the world, traded globally by a large number of individuals and organizations. In

the OTC market, participants determine who they want to trade with depending on

trading conditions, attractiveness of prices and reputation of the trading

counterpart.

The chart below shows global foreign exchange activity. The dollar is the most

traded currency, being on one side of 86% of all transactions. The euro’s share is

second at 37%, while that of the yen is third at 16.5%.

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Why Trade Foreign Currencies?

There are many benefits and advantages to trading Forex. Here are just a few

reasons why so many people are choosing this market:

No commissions

No clearing fees, no exchange fees, no government fees, no brokerage fees.

Brokers are compensated for their services through something called the bid-

ask spread.

•

No middlemen

Spot currency trading eliminates the middlemen, and allows you to trade

directly with the market responsible for the pricing on a particular currency

pair.

•

No fixed lot size

In the futures markets, lot or contract sizes are determined by the exchanges. A

standard-size contract for silver futures is 5000 ounces. In spot Forex, you

determine your own lot size. This allows traders to participate with accounts as

small as $250

•

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A 24-hour market

There is no waiting for the opening bell - from Sunday evening to Friday

afternoon EST, the Forex market never sleeps. This is awesome for those

who want to trade on a part-time basis, because you can choose when you

want to trade--morning, noon or night.

•

No one can corner the market

The foreign exchange market is so huge and has so many participants that no

single entity (not even a central bank) can control the market price for an

extended period of time.

•

Leverage

In Forex trading, a small margin deposit can control a much larger total

contract value. Leverage gives the trader the ability to make nice profits, and

at the same time keep risk capital to a minimum. For example, Forex brokers

offer 200 to 1 leverage, which means that a $50 dollar margin deposit would

enable a trader to buy or sell $10,000 worth of currencies. Similarly, with

$500 dollars, one could trade with $100,000 dollars and so on. But leverage is

a double-edged sword. Without proper risk management, this high degree of

leverage can lead to large losses as well as gains.

•

High Liquidity

Because the Forex Market is so enormous, it is also extremely liquid. This

means that under normal market conditions, with a click of a mouse you can

instantaneously buy and sell at will. You are never "stuck" in a trade. You

can even set your online trading platform to automatically close your

position at your desired profit level (a limit order), and/or close a trade if a

trade is going against you (a stop loss order).

•

Free “Demo” Accounts, News, Charts, and Analysis

Most online Forex brokers offer 'demo' accounts to practice trading, along

with breaking Forex news and charting services. All free! These are very

valuable resources for “poor” and SMART traders who would like to hone

their trading skills with 'play' money before opening a live trading account

and risking real money.

•

“Mini” and “Micro” Trading

You would think that getting started as a currency trader would cost a ton of

money. The fact is, compared to trading stocks, options or futures, it doesn't.

Online Forex brokers offer "mini" and “micro” trading accounts, some with

a minimum account deposit of $300 or less. It does makes Forex much more

accessible to the average (poorer) individual who doesn't have a lot of start-

up trading capital.

•

What Tools Do I Need to Start Trading Forex?

A computer with a high-speed Internet connection and all the information on this

member’s site is all that is needed to begin trading currencies successfully .

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