FOREX trading, also known as the currency exchange, involves buying and selling of different world currencies. As a currency trader, deals are made when the national currency of one country goes up or down - the idea being buy low, sell high. Best of all, because you are trading in money, you will never be left with a product that nobody wants anymore or a company that has gone bankrupt.
If a currency is free-floating, its exchange rate is allowed to vary against that of other currencies and is determined by the market forces of supply and demand. Exchange rates for such currencies are likely to change almost constantly as quoted on financial markets, mainly by banks, around the world. A movable or adjustable peg system is a system of fixed exchange rates,but with a provision for the devaluation of a currency. For example, between 1994 and 2005, the Chinese yuan (CNY, ¥) was pegged to the United States dollar at ¥8.2768 to $1. The Chinese were not the only country to do this; from the end of World War II until 1970, Western European countries all maintained fixed exchange rates with the US dollar based on the Bretton Woods system.
1. The Worlds Trading Market
As the largest trading market in the world, the FOREX market processed over $1.2 trillion dollars daily.
2. The Seven World Currencies
- US Dollar
- Japanese Yen
- Swiss Francs
- Australian Dollars
- British Pounds
- Euro Dollars
- Canadian Dollars
3. A Decentralized Market
The currency trading market will never falter. If one country's gross national product falls, although some traders might lose money temporarily, other traders will be quick to buy the now lower priced currency. If enough people jump on the bandwagon and follow suit, the currency may make a total comeback or even end up higher than before the fall.
4. Day Trading
The market operates 24 hours a day, 365 days a year. So many traders work this market as their employment daily. For instance, if a price of a certain currency does not make a new high on the late hours of the morning, there are still traders out there who are interested in buying the said currency because of probable high value later in the day.
5. Trade Early
The currency values of a nation are declared in the early morning on a daily basis. Thus, as a trader most if not all trading happens in the early morning, with buyers betting on certain currencies going up more than others.