By Cedric Welsch
Recently, there has been a lot of publicity surrounding the foreign exchange market, also known as the Forex or FX market. With the instability of the stock market in these volatile times, investors are looking for new opportunities to make money. Before one jumps in with both feet, it is important to learn how this market works and what the pitfalls can be.
Many people have never heard of this form of trading that is being touted as the latest, greatest thing in investments. However, banks, multinational corporations and institutions have recognized this as a superior opportunity for many years. It has only been in the past few years that an individual has been able to do what previously was restricted to large companies.
This is primarily due to the increasingly widespread use of computers and the availability of the internet to nearly everyone. The ready access to technology, charting tools and other resources which was once limited to professionals has now become available to the general public.
One of the simplest ways to define this market is to say that it is the practice of trading world currencies. A set of two currencies is called a pair. A trade consists of selling one country’s currency to buy that of another one. The common terminology is “trading pairs”.
In contrast to the stock market, the Forex averages a volume of over one and a half trillion dollars per day. The New York Stock Exchange only averages about twenty-five billion. Also different from stocks, there is no one exchange or location at which one can trade. Investors only need a telephone or a computer with online access.
Because trades in this market are made by investors in all parts of the civilized world, it does not operate on the same limited schedule as the stock exchanges. It is open 24 hours a day, five days a week. For someone living in the eastern time zone of the United States, a week for this type of trading typically starts on Sunday afternoon and continues without pause until Friday afternoon.
Many companies offer free classes in how to trade currencies. Some even offer practice trading accounts to allow a person to become familiar with how this market works before spending any real money. Anyone wishing to trade in the foreign exchange market would be well advised to investigate this form of investment and learn its intricacies.
About the Author
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