Know More About Forex

Know More About Forex

Foreign exchange or Forex is the world's most traded market with an average turnover of more than US $4 trillion per day. It is the place where currencies are exchanged to facilitate foreign trade and business. For instance, if you are living in India and want to buy cheese from France, then you have to exchange Indian currency (Indian rupee, INR) for euros (EUR). This applies to traveling too. A French tourist in India cannot pay in euros to see the Tajmahal in Delhi because it is not the local currency in India. The tourist has to get euros converted to Indian rupee at the current exchange rate. The need to exchange currency makes Forex the largest financial market in the world. Forex trading happens electronically over the counter and not on one centralized exchange. Forex is open 24 hours a day and five and a half days a week and trading happens across most time zones.

Forex trading happens in three ways: the spot market, the forwards market and the futures market. In the spot market, currencies are sold and bought at the current price. This price is determined by current interest rates, economic status, etc. The forwards market trading happens over the counter, and contracts are bought and sold over the counter between two parties. The terms and conditions are determined by the parties themselves. In the futures market, traders buy and sell future contracts based on a specified future date. Trading is conducted through yelling and hand signals.

To become a successful Forex trader, you need patience, practice and discipline. Here are a few tips to help you hone your trading skills.
• Identify your goals and choose a trading style that is in sync with your goals
Before you start trading, you should have your goals clearly defined. Then see if your trading method will help you achieve your goals. Consider becoming a position trader if you have funds that you think will benefit from appreciation of trade over a period of a few months. If you are someone who cannot sleep with an open position in the market, then you should consider day trading.
• Choose a broker who matches your style of trading
It is crucial to choose a broker with whom you feel at ease. Ensure that your broker offers you a trading platform wherein you can do your analysis. Get acquainted with each broker's policies and then choose somebody of repute.
• Adhere to a methodology and be consistent

Remember to be consistent with whichever methodology you choose to trade. It is important to adapt your methodology too with the changing dynamics in the market. Some traders use charts to time a trade. Others may study the underlying fundamentals of a company.

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