Forex Trading

Forex Trading is one of the hottest investment opportunities available. With a small initial investment traders can realize quick profits at relatively little risk. To be a successful Forex trader, however, requires knowledge and skill. The Forex Aid website will help you gain both.

FOREX is an acronym for Foreign Exchange. The foreign exchange market is a worldwide forum for trading currencies against each other. This can give quick profits because currencies are continually changing in price.

The volume of trading on the FOREX is astounding. Each day - 5 days a week - transactions worth about US$1.5 trillion dollars are handled on the foreign exchange market.

To give you a comparison, the United States Treasury Bond market does about $300 billion a day in business and all of the American stock exchanges combined total a mere $100 billion a day.

This means that the FOREX is the single largest investment market in the world.

How Does FOREX Work?

Forex traders always buy and sell currencies in pairs. They may buy American dollars against Swiss francs, or sell Canadian dollars against the UK pound. Forex trading can be profitable because there is always movement on the currency market.

Forex profits can be made on both falling and rising currency prices. This is possible because Forex traders can buy or sell any currency. If they believe a currency is set to fall in price they will sell that currency while buying another. Conversely if they think the currency price is due to rise they will buy that currency and sell another.

The Forex trader is not in actual possession of the money he or she trades. Currencies are traded in blocks of US$100,000 and few individual investors have that kind of money to swing around.

So Forex trading is usually done on margin which means you control a large amount of money with a small investment. A margin of 100:1 means that you can control a standard lot of $100,000 with an initial investment of $1,000. Mini lots of $10,000 can be controlled with as little as $100.

Margin (or leverage) is important in Forex trading because the price of currencies change by fractions of a cent. The only way decent profits can be made is by trading large blocks of currencies, and those large blocks are only available to the average investor on margin.

History of the FOREX  

Prior to 1971 currencies had fixed values. The development of world trade created the need to adjust currency values according to supply and demand, so to meet this need the Foreign Exchange Market was established in 1971.

The Forex saw steady growth through the 1970s but with the advent of electronic trading in the 1980s the Forex market exploded.

The Forex is currently made up of about 5000 trading institutions such as international banks, government banks (like the US Federal Reserve) and companies and brokers which specialize in Foreign Exchange.

Forex trading centers are located all around the world and for this reason Forex can be traded 24 hours a day, 5 days a week. Each trading center maintains regular business hours, but due to the various time zones, when one center is closing for the day another is in full swing.

The major Forex trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris, and Frankfurt.

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