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Overview of forex

Overview of forex

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Published by richard309
Tips on Forex Investing. http://tinyurl.com/7qpdmhm
Tips on Forex Investing. http://tinyurl.com/7qpdmhm

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Published by: richard309 on Jan 09, 2012
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 ==== ====Tips on Forex Investing.http://tinyurl.com/7qpdmhm ==== ====Each day, millions of trades are made in a currency exchange market called Forex. The word"Forex" directly stems off of the beginning of two words - "foreign" and "exchange". Unlike othertrading systems such as the stock market, Forex does not involve the trading of any goods,physical or representative. Instead, Forex operates through buying, selling, and trading betweenthe currencies of various economies from around the world. Because the Forex market is truly aglobal trading system, trades are made 24 hours a day, five days a week. In addition, Forex is notbound by any one control agency, which means that Forex is the only true free market economictrading system available today. By leaving the exchange rates out of any one group's hands, it ismuch more difficult to even attempt to manipulate or corner the currency market. With all of theadvantages associated with the Forex system, and the global range of participation, the Forexmarket is the largest market in the entire world. Anywhere between 1 trillion and 1.5 trillionequivalent United States dollars are traded on the Forex market each and every day. Forex operates mainly on the concept of "free-floating" currencies; this can be explained best ascurrencies that are not backed by specific materials such as gold or silver. Prior to 1971, a marketsuch as Forex would not work because of the international "Bretton Woods" agreement. Thisagreement stipulated that all involved economies would strive to hold the value of their currenciesclose to the value of the US dollar, which in turn was held to the value of gold. In 1971, the BrettonWoods agreement was abandoned. The United States had run a huge deficit during the VietnamConflict, and began printing out more paper currency than they could back with gold, resulting in arelatively high level of inflation. By 1976, every major currency worldwide had left the systemestablished under the Bretton Woods agreement, and had changed into a free-floating system ofcurrency. This free-floating system meant that each country's currency could have vastly differentvalues that fluctuated based on how the country's economy was faring at that time. Because each currency fluctuates independently, it is possible to make a profit from the changesin currency value. For example, 1 Euro used to be worth about 0.86 US dollars. Shortly thereafter,1 Euro was worth about 1.08 US dollars. Those who bought Euros at 86 cents and sold them at1.08 US dollars were able to make 22 cents profit off of each Euro - this could equate to hundredsof millions in profits for those who were deeply rooted in the Euro. Everything in the Forex marketis hanging on the exchange rate of various currencies. Sadly, very few people realize that theexchange rates they see on the news and read about in the newspapers each day could possiblybe able to work towards profits on their behalf, even if they were just to make a small investment.The Euro and the US dollar are probably the two most well-known currencies that are used in theForex market, and therefore they are two of the most widely traded in the Forex market. In additionto the two "kings of currency", there are a few other currencies that have fairly strong reputation forForex trading. The Australian Dollar, the Japanese Yen, the Canadian Dollar, and the NewZealand Dollar are all staple currencies used by established Forex traders. However, it isimportant to note that on most Forex services, you won't see the full name of a currency written
 
out. Each currency has it's own symbol, just as companies involved in the stock market have theirown symbol based off of the name of their company. Some of the important currency symbols toknow are: USD - United States Dollar EUR - The Euro CAD - The Canadian Dollar AUD - The Australian Dollar JPY - The Japanese Yen NZD - The New Zealand Dollar Although the symbols may be confusing at first, you'll get used to them after a while. Rememberthat each currency's symbol is logically formed from the name of the currency, usually in someform of acronym. With a little practice, you'll be able to determine most currency codes withouteven having to look them up. Some of the richest people in the world have Forex as a large part of their investment portfolio.Warren Buffet, the world's richest man, has over $20 Billion invested in various currencies on theForex market. His revenue portfolio usually includes well over one-hundred million dollars in profitfrom Forex trades each quartile. George Soros is another big name in the field of currency trading- it is believed that he made over $1 billion in profit from a single day of trading in 1992! Althoughthose types of trades are very rare, he was still able to amass over $7 Billion from three decadesof trading on the Forex market. The strategy of George Soros also goes to show that you don'thave to be too risky to make profits on Forex - his conservative strategy involves withdrawing largeportions of his profits from the market, even when the trend of his various investments seems tostill be correlating upward. Thankfully, you don't have to invest millions of dollars to make a profit on Forex. Many peoplehave recorded their success with initial investments of anywhere from $10,000 to as little as $100for an initial investment. This wide range of economic requirements makes Forex an attractivevenue for trading among all classes, from those well entrenched in the lower rungs of the middleclass, all the way up to the richest people alive on the planet. For those on the lower end of thespectrum, access to the Forex market is a fairly recent innovation. Within the past decades,various companies began offering a system that is friendlier to the average person, allowing thesmaller initial investments and greater flexibility that is seen in the market today. Now, no matterwhat economic position you are in, you can get started. Although it's possible to jump right in andstart investing, it's best that you make sure you have a better understanding of the ins and outs ofForex trading before you get started. The world of Forex is one that can be both profitable and exciting, but in order to make Forex workfor you it is important that you know how the system works. Like most lucrative activities, tobecome a Forex pro you need a lot of practice. There are many websites that offer exactly this, thesimulated practice of Foreign Exchange.
 
 The services provided by online practice sites differ from site to site, so it is always a good idea tomake sure you know all of the details of the site you are about to use. For example, there areseveral online brokers who will offer a practice account for a period of several weeks, thenterminate it and start you on a live account, which means you may end up using your own moneybefore you are ready to. It's always a good idea to find a site that offers an unlimited practiceaccount. Having a practice account allows you to learn the ways of the trade with no risk at all.Continuing to use the practice account while you use a live account is also a beneficial tool foreven the most seasoned Forex traders. The use of a no risk practice account enables you to tryout new trading strategies and tread into unknown waters. If the strategy works, you know that youcan now implement that strategy into your real account. If the strategy fails, you know to refrainfrom the use of that strategy without the loss of any actual money. Of course, simply using a no risk account won't get you anywhere. In order to make money withForex, you need to put your own money in. Obviously, it would be ridiculous to travel to othercountries to purchase and sell different currencies, so there are many websites that you can use todigitally trade your money. Almost all online brokerage systems have different features to offer youso you have to do the research to find out which site you wish to create an account with.All brokers will require specific information of you to create your account. The information they willneed from you includes information required to communicate with you, including your name,mailing address, telephone number, e-mail address. They also require information needed toidentify who you are, including your Social Security number, Passport number or Tax Identificationnumber. It is required by law that they have this information, so they can prevent fraudulenttrading. They may also collect various personal information when you open an account, includinggender, birth date, occupation, and employment status. Now that you have practiced trading currency and set up your live account, it is time to truly enterthis profitable yet risky world. To make money with Forex, you do need to have money to beginwith. It is possible to trade with very small amounts of money, but this will also lead to very smallprofits. As is with many other exchange systems, high payouts will only come with high risks. Youcan't expect to start getting millions as soon as you put money in to the market, but you can'texpect to make any money at all if you don't put in at least a 3-digit value. As most Forex brokers will warn you, you can loose money in the foreign exchange market, sodon't put your life savings into any one trade. Always trade with money that you'd be able tosurvive without. This will ensure that if you get a bad trade and loose a lot of money, you wont endup on the streets, and you'll be able to make a comeback in the future. So how does trading currency work? Logically, trades always come in pairs. For example, acommon trade would be the United States Dollar to the Japanese Yen. This is expressed asUSD/JPY. The way to quote a trade is kind of tricky, but with practice it becomes as natural asreading your native language. In a Forex quote, the first currency in the list (IE: USD in USD/JPY)is the base currency, and in the quote the base is always one. This means if (hypothetically ofcourse) One USD was worth Two JPY, that the quote would be expressed as 1/2. When trading in Forex, we use pips. Pip is an acronym for "percentage in point". A pip a certaindecimal place in a number compared to the same decimal place in another number. Using pips,we track the gains and losses of a currencies value compared to another's. Let's take a look at an

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