Forex Made Easy For Everyone
by Brian Kolewe
Forex made easy is as simple as you would want it to be. Theforeign exchange market is a worldwide market and according tosome estimates is almost as big as thirty times the turnover ofthe US Equity markets. That is some figure to chew on. isthe commonly used term for foreign exchange. As a person whowants to invest in the market, one should understand thebasics of how this currency market operates. can be madeeasier for beginners to understand it and here's how.
Foreign exchange is the buying and the selling of foreignexchange in pairs of currencies. For example you buy US dollarsand sell UK Sterling pounds or you sell German Marks and buyJapanese Yen. Why are currencies bought or sold? The answer issimple; Governments and Companies need foreign exchange fortheir purchase and payments for various commodities andservices. This trade constitutes about 5% of all currencytransactions, however the other 95% currency transactions aredone for speculation and trade. In fact many companies will buyforeign currency when it is being traded at a lower rate toprotect their financial investments. Another thing about foreignexchange market is that the rates are varying continuously andon daily basis. Therefore investors and financial managers trackthe rates and the market it on a daily basis.
Those who are involved in the trade know that almost 85%of the trading is done in only US Dollar, Japanese Yen, Euro,British Pound, Swiss Franc, Canadian Dollar and AustralianDollar. This is because they are the most liquid of foreigncurrencies (can be easily bought and sold. In fact the US Dollaris most recognizable foreign currency even in countries likeAfghanistan, Iraq, Vietnam etc).
Being a truly 24/7 market, the currency trading markets opens inthe financial centers of Sydney, Tokyo, London and New York inthat sequence. Investors and speculators alike respond to theever-changing situations and can buy and sell simultaneously thecurrencies. In fact many operate in two or more currency marketusing arbitrage to gain profits (buying in one market andselling in another market or vice versa to take advantage of theprices and book profits).
While dealing in forex, one should have a margin account. Quitesimply put if you have US$ 1,000 and have a margin accountwhich leverages 100:1 then you can buy US$ 100,000 since youonly need 1% of the US$100,000 or US$1,000. Therefore it meansthat with margin account you have US$ 100,000 worth of realpurchasing power in your hand.
Since the foreign currency market is fluctuating on a continuousbasis, one should be able to understand the factors that affectthis currency market. This is done through Technical Analysisand Fundamental Analysis. These two tools of trade are used in avariety of other markets such as equity markets, stock markets,mutual funds markets etc. Technical Analysis refers to reading,summarizing and analyzing data based on the data that isgenerated by the market. While fundamental Analysis refers tothe factors, which influence the market economy, and in turn howit would affect the currency trading. Of course there are othereconomic and non economic factors which can suddenly affect thetrading of the markets such as the 9/11 tragedy etc. Oneneeds to have a shrewd acumen and a few number crunchingabilities to strike gold in the market.
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