What is Forex Trading? | Money File

What is Forex Trading?

In Bills & Budgeting
Posted October 23, 2012 by Kalen Smith

There are a variety of different financial markets investors can trade on. Most investors prefer to invest in stocks and bonds. However, they also have the option of trading through the foreign exchange market (also known as Forex).

What is Forex?

The Forex Market is a market where investors can exchange two different foreign currencies. This market is larger than any stock or bond market in the world.

People using the Forex market fall into one of two categories:

1. People who need to make payments to contractors or suppliers overseas. They can?t usually make these payments in their domestic currency, so they will have to exchange the currency through the?Forex?market first.
2. Speculative traders who are trying to make a profit from fluctuating exchange rates. They can make a profit when the currency rates change the same way stocks prices fluctuate.

The economic principles of the?Forex?market are the same as any other financial market. However, there are a couple of key differences:

• All news that influences currency rates is publicly available, which means there is very little potential for insider trading.
• Traders can profit from minute changes in the currency rates.
• Trades can be placed anytime day or night.
• All trades are placed over the counter.
• Unlike the stock market, trading Forex is a zero-sum game (meaning that for every dollar one party makes another party has to lose a dollar).

Many people have become motivated to participate in the Forex market in recent years. The emergence of digital technology has allowed many people to have access to the market which was previously restricted to large financial institutions.

There are a number of resources that can help you learn to trade Forex. This can be one of the most profitable markets in the world. However, you want to make sure you aren?t prepared for the risks involved.

Have you tried trading Forex? What have your experiences been?

Andrew Mitchel is a contributor for Trading Forex for Beginners, where he teaches people how to trade Forex.

Source: http://www.moneyfile.net/budgeting/what-is-forex-trading/

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