If you are just starting out in the stock trading business
or if you are already in it, you may have heard the term Forex trading quite a
few times, but you probably might not have a clue on what it may actually mean.
Forex or foreign exchange trading is actually the largest
and a fast-rising financial industry in stock trading these days. Here is a
quick introduction to trading in foreign exchange.
What Is Forex Trading?
The Foreign Exchange market (Forex) is actually the largest
financial market in the world. It actually makes a volume of over 2 trillion
U.S. dollars a day, and as compared to its counterpart –the New York Stock
Exchange (NYSE) which usually only trades a volume of 25 billion dollars each
day, this industry is so huge that it becomes a profitable playground for many
investors including central banks, large banks, multinational companies and
even governments.
What is actually traded on the foreign exchange is money. It
actually consists of the concurrent buying and selling of currencies, which are
traded through brokers and are traded in pairs.
When you are buying currency, it is like you are investing
on the economy of a particular country. For example, if you buy U.S. dollars
then it is as if you are buying a share of the U.S. economy. Whatever the
market thinks about the current health of a country’s economy would directly be
reflected on the price of its legal tender and this is how currencies go up or
down.
Forex Trading For The Masses
Originally the whole concept of trading in the Foreign
Exchange was only intended for huge companies and banks, but not for normal
citizens. After all, you could only take part in the trade if you have around
ten to fifty million dollars minimum.
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