The foreign exchange
market (forex or FX for short) is one of the most exciting, fast-paced
markets around. Until recently, forex trading in the currency market had
been the domain of large financial institutions, corporations, central banks,
hedge funds and extremely wealthy individuals. The emergence of the
internet has changed all of this, and now it is possible for average
investors to buy and sell currencies easily with the click of a mouse through online brokerage accounts.
Daily currency fluctuations are usually very small. Most currency pairs
move less than one cent per day, representing a less than 1% change in
the value of the currency. This makes foreign exchange one of the least
volatile financial markets around. Therefore, many currency speculators
rely on the availability of enormous leverage to increase the value of
potential movements. In the retail forex market, leverage can be as much as 250:1. Higher leverage can be extremely risky, but because of round-the-clock trading and deep liquidity,
foreign exchange brokers have been able to make high leverage an
industry standard in order to make the movements meaningful for currency
traders.
Extreme liquidity and the availability of high
leverage have helped to spur the market's rapid growth and made it the
ideal place for many traders. Positions can be opened and closed within
minutes or can be held for months. Currency prices are based on
objective considerations of supply and demand
and cannot be manipulated easily because the size of the market does
not allow even the largest players, such as central banks, to move
prices at will.
The forex market provides plenty of opportunity
for investors. However, in order to be successful, a currency trader has
to understand the basics behind currency movements.
The goal of
this forex tutorial is to provide a foundation for investors or traders
who are new to the foreign currency markets. We'll cover the basics of
exchange rates, the market's history and the key concepts you need to
understand in order to be able to participate in this market. We'll also
venture into how to start trading foreign currencies and the different
types of strategies that can be employed.
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