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What is Forex?

If you read about investing, you've seen the word forex pop up. But because forex doesn't get much publicity in the major publications and websites, many investors don't know that forex is just short for "foreign exchange." So trading the forex market is simply trading foreign currencies. As recently as ten years ago, currency trading had high barriers to entry, so only large banking and institutional firms had access to the tools and systems required to play in the forex game. Recently, however, technology has developed to the point that any individual investor can hop right in and trade with one of the many online platforms.

When buying and selling in the forex market, you'll see that there are four "currency pairs" that dominate the percentage of trades. Those four are the Euro vs U.S. Dollar, US Dollar vs Japanese Yen, US Dollar vs Swiss Franc, and US Dollar vs British Pound.

The goal when investing in currency is to be holding a currency that appreciates in value in relation to the other currencies. To use an overly simplistic example, if you bought 50 British Pounds for 100 US Dollars, held the Pounds for 1 week, and in that period the value of Pounds increased in relation to US Dollars, you could then convert those Pounds back into dollars for, say, $120.

Unlike the domestic stock markets, the forex is open for trades 24 hours a day. Much like the phrase "it's always noon somewhere," it's always business hours at some region of the globe. Since every country trades on the FX market, and it's open all day, the daily volume is roughly $1.2 trillion, which

dwarfs that of the NYSE. Another comparison to make in order to truly realize the magnitude of the forex market is with the currency futures market (which has around 1% of the daily volume).

One other important distinction to make is that currency trading is not centered on an exchange like the NYSE or NASDAQ. There is no central body or organization required to act as middleman. Trading circulates between major banking centers around the world.

Until recently, there were strict financial requirements and massive minimum transaction sizes which prevented individual investors from trading. But with the advent of the internet came the FX brokers. A forex broker is similar to an online stock trading account such as etrade. Anybody can open an account and buy and sell in any quantity. Because the brokers have thousands of investors placing orders through them, they are able to meet the large minimum transaction size by purchasing in large blocks and distributing currency amongst the purchasing investors.

Although it is now easy to start trading forex, it is a complicated and complex market. While it offers fantastic opportunity for wealth, it is also very easy to lose your shirt in a hurry. Before trading forex, do your homework and read as much as you can find before investing your hard earned money.

About the author:

This article is just a small piece of the free Forex Education at forexgameplan.com. Go learn about this incredible market and sign up today while the 30 day course is still free.
Written By: Francis Gillen




Telegraph.co.uk

FOREX-Dollar rallies broadly, euro down as inflation weighs
Reuters - 12 hours ago
... Boris Schlossberg, director of currency research at GFT Forex in New York. "On the other hand, the Obama stimulus package has also helped the dollar. ...
Dollar soars against euro CNNMoney.com
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RTE.ie

FOREX-Euro falls as ECB rate cut expectations grow
Reuters - 17 hours ago
The euro fell to 3-week lows against both the dollar and sterling as a more dovish tone by some ECB policymakers and expectations that euro zone inflation ...
Euro Falters as CPI Suggests ECB Will Cut Rates (Forex Video) Daily FX
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CEP News

Forex Market Update: Dollar Extend Gains Against Euro and Pound
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HispanicBusiness.com

Fed Minutes Affect on the US Dollar
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Conmed cuts Q4 view on forex changes, sales volume drop
Reuters - Jan 5, 2009
The company, which also cut its 2009 outlook, said the weakening of the US dollar had a positive effect on its operations in the first three quarters. ...

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Forex Trading Signals Well-Positioned for Gains in the New Year
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dollar higher at noon
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Taiwan dollar rises on foreign funds, eyes c.bank
Reuters India, India - 15 minutes ago
Volume on the main Taipei Forex Inc exchange was moderate at $190 million after 45 minutes of trade, level with the $190 million on Tuesday. ...

Ghana Broadcasting Corporation

FOREX-Dollar falls on low rates, pound under pressure
Reuters - Dec 30, 2008
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