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Fundamental Analysis
Fundamental analysts use fundamental economic and political information (e.g. unemployment rates, economic policies, inflation, and growth rates) about the countries involved in the currency pairs they trade...
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A Short Introduction To FOREX.
FOREX is the world’s largest and most liquid trading market. Many people trade in the FOREX as a home business, due to the profits they can achieve. Even though people have had the opportunity to participate in trading foreign currencies for profit (in the same way banks and large corporations do) since 1998, it is just now becoming very popular. Even though it has been a loosely guarded secret in the past, every day more and more investors are turning to the all-electronic world of FOREX trading for income and profit because of its numerous benefits & advantages over traditional trading instruments, like stocks, bonds and commodities.
Since FOREX is new to many people, many misconceptions exist. This article is intended to provide illumination on some FOREX concepts without going into too much detail. It will explain what it is, and why it exists. A successful trader described his view of FOREX in the following way. "Trading FOREX is like picking money up off the floor. Not trading FOREX is like leaving it there for someone else to pick up." Another trader described it in the following way. "Trading FOREX is like having an ATM machine on your own computer." Both were trying to convey the tremendous profit potential that exists.
Here is a short description of what FOREX is and how some traders, profit from it. The Foreign Exchange Market, also referred to the "FOREX" or "FX" market, is the spot (cash) market for currency. It is not trading the futures market, where you buy a contract to purchase a particular currency at a future price in time. What FX traders do is much less risky than trading currencies on the futures market, much more profitable, and a lot easier, than trading stocks. FX Trading is not centralized or bound to an exchange like the stock and futures markets. The FX market is considered an Over-the-Counter (OTC) or 'Interbank' market, since the entire market is run electronically, within a network of banks, continuously over a 24-hour period.
Here's what you are actually trading when you participate in the Foreign Exchange (FOREX) market. Essentially, like the large banks who use the FX market to protect themselves from the fluctuating exchange rate of different currencies, as an investor, what a FX trader is doing is simultaneously exchanging one country's currency for another. So, in actuality, they're electronically trading a currency-pair and the price that is quoted is the exchange rate between the two currencies. For example, EUR/USD last traded at 1.2850 - One Euro is worth $1.2850 US dollars.The first currency (in this example, the EURO) is referred to as the base currency and the second (/USD) as the counter or quote currency.
The FOREX has a DAILY trading volume of around $1.5 trillion dollars - 30 times larger than the combined volume of all U.S. equity markets. This means that 1,498,574 skilled traders could each take 1 million dollars out of the FOREX market every day and the FOREX would still have more money left than the New York Stock exchange every day!
The FOREX plays a vital role in the world economy and there will always be a tremendous need for the FOREX market. International trade increases as technology and communication increases. As long as there is international trade, there will be a FOREX market. The FX market has to exist so a country like Japan can sell products in the United States and be able to receive Japanese Yen in exchange for the US Dollar.
As an investor in this market, you can use trading techniques and tactics that can allow you to make large profits. With only 5% of the daily volume coming from banks, government and large corporations who need to hedge, the other 95% of daily volume is for speculation and profit.
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