What Is Forex Made Easy?
Foreign Exchange or Forex (also known as 4X) is an international exchange market in which currencies are bought and sold, sold and bought, 24/6. Forex as we know it now began in the early 1970s, when floating currencies and exchange rates were introduced.
Forex is unique because there are no external controls. With that comes the good and the bad. On the one hand, our societies all seem to be overregulated. On the other hand, the government regulators and private watchdog groups don’t think we have enough regulation.
However, many government and private sector regulators want to change this. They feel that an unregulated market is extremely dangerous because people and accounts can be wiped out in minutes by greedy con artists and market manipulators. Probably regulation will occur later rather than sooner. Like any market this large, there are thousands of small and large players involved, and change is painstakingly slow.
The 4X market cannot be easily manipulated. However, there are times that the “big boys” can and do manipulate the market at will. Therefore, it’s prudent to discover when those times are (holidays or whenever regular Joes are able to find extra time to invest).
Forex markets trade between $1-1.5 trillion US dollars (USD) daily, every day, making it the largest liquid market in the world. Think about that figure: $1.5 trillion each and every day. Because of its sheer volume and hectic pace, one investor could not significantly affect the price of a major currency.
Market liquidity essentially means that traders and investors can open and close their trades within seconds because there are always willing buyers, sellers, and brokers (who will promptly take a fixed amount of money on each trade executed).
In Forex, there are four major currency pairs: US Dollar-Japanese Yen (USD/JPY), Euro-US Dollar (EUR/USD), US Dollar-Swiss Franc (USD/CHF), British Pound-US Dollar (GBP/USD). The first currency in the pair is known as the “base” currency. The counter currency is the second half of the pair. The Euro-US Dollar is extremely liquid and is the most traded pair on the exchange.
The main currency pairs are typically traded as 100,000 base units. For instance, if you were buying USD/JPY at 0.97 you would be paying Japanese Yen (JPY) for US Dollars as follows: .97 X 100,000 units = $97,000 Japanese Yen for 100,000 USD. Don’t worry, though, because you won’t be required to come up with $97,000 JPY to learn this skill. It is a process called trading on margin or margin trading. That is an entirely different subject and requires pages worth of instruction. Forex Made Easy is here to assist and we will be answering those questions one by one.
Filed under: Currency-Trading
Leave a Reply