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|TweetPeter Bains On How To Trade Currencies Like The Big Dogs
The currency (foreign exchange) market is the largest and oldest financial market in the world. It is also called the foreign exchange market, or “FOREX” or “FX” market for short.
It is the biggest and most liquid market in the world, and it is traded 24 hours-a-day. The forex market is a cash (or “spot“) inter-bank market. By comparison, the currency futures market is only one per
cent as big.
Foreign Exchange simply means the buying of one currency and selling another at the same time. That’s it!
In other words, the currency of one country is exchanged for those of another. The currencies of the world are on a floating exchange rate, and are always traded in pairs – Euro/US Dollar, US Dollar/Yen, etc.
In excess of 85 percent of all daily transactions involve trading of the major currencies:
– US Dollar,
- Euro
- Australian Dollar,
- British Pound,
- Canadian Dollar
- Japanese Yen,
- Swiss Franc
Unlike the futures and stock markets, trading of currencies is not centralized on an exchange.
Forex literally follows the sun around the world. Trading moves from major banking centres of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S.
In the past, the forex inter-bank market was not available to small speculators due to the large minimum transaction sizes and often-stringent financial requirements. Banks, major currency dealers and the occasional huge speculator used to be the principal dealers. Only they were able to take advantage of the currency market’s fantastic liquidity and strong trending nature of many of the world’s primary currency exchange rates.
Today, foreign exchange market maker brokers are able to break down the larger sized inter-bank units, and offer small traders the opportunity to buy or sel any number of these smaller units (lots) from their PC’s
These brokers give virtually any size trader, including individual speculators or smaller companies, the option to trade the same rates and price movements as the large players who once dominated the market.
Market makers quote buying and selling rates for currencies, and they profit on the difference between their buying and selling rates.
How the Retail Spot Forex Works
When you use retail spot Forex software, it only requires an internet connection to trade real-time. No extra data-feed is required.
All online Forex brokers’ software is real-time, rather than delayed. If you download a free 30-day demo of the software, you can “practice trade” in real-time with the exact same quotes as a live account. The software is exactly the same, and you receive virtual money for the account.
You are then able to enter trades in real time, and monitor them just as though it were a real account.
You will experience no difference between the demo account and a live account. When you log onto your trading platform, you see your price quotes, and you simply click on the price to sell or buy. It will ask you how many lots or contracts you want, and then you click ok, and you are in.
You can also use the charts they provide with the trading platform; they will reflect the movement of the real-time price of their trading platform. With those charts, you usually have the ability to place horizontal lines where you choose (pivot numbers).
Each currency is quoted with a “pip spread”. This is how the dealer makes his money. With most online retail brokers, there are no commissions.
In my trade window, I would see my money change as the market price moves back and forth. As it moves in my favor, my negative position is removed as soon as the market is trading 1.7210/1.7215, or higher.
In the spot forex market, it is common for currencies
to move 100 to 300 pips/points in a 24-hour session.
If you like volatility, there is no currency more volatile than the Franc.
If it’s action you’re looking for, like Mr. Magoo driving
a sports car, then the forex is the place to be.
Yours in trading,
Peter Bain,
Founder and CEO
Forexmentor.com
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