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Definition and introduction of Forex Trading
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After reading the following article you people will be able to understand;
What is Forex market?
How Forex market Works?
What are the strategies of the Forex Market?
Economic indicators of the respective Currencies.
and many more....
I will try to make this article more helpful and interesting so that you can understand it very well. When you will complete the article you will then have a perfect knowledge of Forex Trading and Forex markets as well and you wil be able to learn real world Forex strategies.
Forex:
Forex Market is a market where all the institutions including banks, Governments, Investors, Businesses and Traders exchange and speculate on all Currencies. Forex market is also known with other different names like Fx Market, Currency Market, Foreign exchange Currency Market and Foreign Currency Market. The market turnover is over $4.00 trillion and it is most liquid market in the universe.
The Forex market remains open 24 hours and 5 days a week (24/5). Few major world trading centers are listed below for your knowledge which are most important in Forex market:
· London
· Tokyo
· Zurich,
· Paris
· Hong Kong
· Frankfurt
· Singapore
· Sydney
· New York
It should keep in mind that there is no centralized place for Forex trading. However, in formal trading all the requisitions and orders are processed “Over the Counter(OTC)” and they have a centralized market. Different Banks have different trading rates of foreign currencies. So, its upto the broker who takes all the rates from different banks and build an approximate average for himself and his clients as well. Broker is a person who is effective and efficient in trading and know all the market environment. They are also known as “Market Maker” because they make the market for you.
History of Forex Market:
Let me tell you people about the history of Forex market. May be it seems little bit boring but it is has much importance because without having sufficient knowledge of Forex Market history, you cannot be a good strategist. So, I have elaborated the history in nutshell to understand efficiently. Before going to the history, I want to elaborate the term “Pegging”, it means specific currency is attached with the specific yardstick. The following regimes are enough to elaborate the this term.
Gold Pegging:
In 1876, Gold Pegging was implemented. Basic rule of this standard was that the paper currency will be backed by the Sold Gold. This rule was implemented to stabilized the all currencies by pegging them with Gold's price. Overall, this theory was very good but with the passage of time it created boom bust patterns which led to the demise of Gold.
In Beginning of Wold War II, this standard become useless as the some of the major European countries didn't have sufficient gold as a backup for all the currencies they are printing to meet the expenses of their large military projects.
Dollar Pegging:
U.S dollar is the most stable currency in the world. Later on after Gold Pegging, the currencies are now being backed by the U.S Dollar. This is called “Bretton Woods Agreement”. This agreement was introduced in 1944. This was 1971 when U.S declared that gold will not be exchange for U.S dollars to held in foreign reserves which led the end of Bretton Wood Agreement. After the breakdown of the said agreement, floating foreign exchange rates are observed in 1976. This gave the birth of current forex market. However, on that time it was not traded electronically but after the 1990s mid.
Now, I am further moving the more interesting topics of my article.
Introduction to Forex Trading.
Going on to the main topic of my article, let me tell you about the Forex trading. Forex trading is basically pertains to the retail traders just like you and I. Elaborating the definition, it is the speculation on price of one currency to another. Lets have a look at the example for your better understanding. Suppose, if you are anticipating that the Australian Dollar will rise against the Great British Pound then you can buy the AUD/GBP pair low and when the prices will go higher you can sell it to make the profit.
On the other side, if the U.S dollar strengthen in the said scenario you will definitely be on losing side. That is the reason I am focusing on that be aware of the dark side of this world. As you know that Risk is directly proportion to return. Higher the risk gives you higher return and vice versa. But I will recommend you to take risk always on moderate side.
