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Foreign Exchange Trading Made Easy by John Eather
Definition-
Foreign exchange
trading also known as FX or Forex, is defined as the trading of one
currency in exchange for another. The foreign exchange market is the
biggest, most lucrative and liquid market on earth, trading 24 hours a
day, 7 days per week. Up to US$1.5 trillion dollars worth of trades are
conducted everyday. Central Banks, Corporations, Individuals and
speculators form part of the forex participant base. 5 % of daily
volumes consist of Government and commercial currency conversions, the
other 95% is made up of speculation and trading.
Advantages- Foreign exchange trading has major advantages including
high liquidity, all day and all night trading due to overlapping
trading session, traders are given the chance to react to market,
economical and political events as they occur, low transaction costs
and trade on margin opportunities.
Risk- The risk involved with forex trading is just as high as the
possible reward. However it's very important to understand that you
stand the chance of losing not only any profits made but also your
total initial investment. If you are gambling on the market with money
you don't actually have or you are not willing to lose, rather avoid
it. Should you feel uncertain about this trade type, follow your gut
feeling and rather steer clear from trading. Invest in trade courses or
books on the subject to assist you with understanding the mechanics of
the market before serious trading is attempted
Rollover and spot markets- Forex deals are normally conducted on the
spot basis, meaning that deals are done at on the spot rates and
settled within two working days. However some positions remain open and
are rolled over, expiring only on next settlement day. The rate is then
referred to as next rate.
Quoting- Quoting refers to the bid and asking price for the currency
pair. The bid price is usually on left hand side and asking price on
the right hand when indicated.
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