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| FOREX MARKET |
The Foreign Exchange market or the Forex as it is shortly called is the largest financial trading platforms in the world. It is a non-stop market where currencies of nations are traded. Foreign currencies are simultaneously bought and sold across the world, thus determining the value of currencies as they appreciate or depreciate in value. Forex Trading is not centralized or restricted to a trading floor. It is an Over-the-Counter (OTC) or 'Interbank' market, since the entire market is run electronically through a network of banks.
Purpose of the Forex market: The Foreign currency exchange deals in currency. Money from all over the world is bought and sold. The purpose of this trading, buying and selling of currency is to buy the currency of one country at a low price, sell it at a higher one, thus making a profit.
Similarities between the Forex and the stock market
The main similarity between the two is that both involve buying and selling of currencies.
Both have the objective of making a profit.
Differences between the Forex and the Stock market
Unlike the stock market, the Forex has a higher liquidity.
The Forex market never sleeps. It operates round the clock. On the other hand, the Stock market operates 5 days a week, 7 hours each day.
Forex trading has higher leverage than that of the stock market. This means there is a lot of potential to make profits as well as losses in the Forex market.
How to start trading on the Forex market: Before you start trading on the Forex market, it is essential that you hire the services of a reliable and well known broker. Brokers possess invaluable and first hand experience trading on the Forex market. Consider the following factors when it comes to hiring a broker:
Choose a broker that offers low spreads. Spread is the difference in price at which the currency is purchased and the price at which it can be sold at any given time. Spreads are calculated in pips. Forex brokers do not charge a commission; hence they make their money from the spreads.
Ensure your broker’s credibility. Choose a broker who is backed by a reliable and large financial institution like a bank or any financial institution. He should also be registered with the Futures Commission Merchant (FCM).
The broker should have access to latest research tools, graphs, charts, news and data. A knowledgeable broker will make wise decisions based on his Forex forecasting and experience.
Also understand the various terms and currency symbols used frequently in forex trading. There are many books and websites which have made the understanding and technical know how on Forex trading quick, easy and simple.