hr: Currency

Photo Credit: Hélio Costa

This introduction is meant for people who are just beginning to explore the exciting world of FOREX.

So what is FOREX or FX you might ask? FOREX is an abbreviation for Foreign Exchange. It is a market that deals mainly with exchanging or trading different currencies.

Due to the advancement of communication and the Internet FOREX has become so common and widespread that even you can trade currencies in your own home.

Now don’t confuse FOREX with futures market. In the latter, a contract is drawn-up stating that you’re buying a particular currency at a future price.

FOREX on the other hand, entails a less risky procedure than futures market. It’s a lot more profitable too compared to stocks - and has it been mentioned that it’s also more fun?

So what should you do or where should you go in order for you to have access to the FOREX market?

Unlike the traditional stock market where trading is more often than not “centralized,” trading in currencies is not tied down to any trading floor nor is it centralized like the stock exchange.

Currency trading is more of an interbank or over the counter kind of market, mainly because FOREX is a non-stop, 24-hour, electronically run market.

What does a FOREX trader do? How is he involved in the FOREX market?

The FOREX trader, just like large banks, tries to shield himself from the fluctuations or drastic changes in exchange rates of different currencies.

The FOREX trader actually neither sells nor buys anything, since FOREX is chiefly a speculative endeavor. Therefore you don’t see any actual transfer of currencies, since all of these trades are virtually just computer entries. In this realm, currencies lose their “original value” and are simply floated depending on its current market value and the relative value other currency it is paired with.

If your account is in dollars then your gains as well as losses will also be computed in dollars. The transaction will then be recorded as such on the trader’s account.

In essence FOREX is nothing but a speculative move in order to protect yourself from unfavorable changes in exchange rates of different currencies. A forex trading demo can help you to learn more.

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