For those who have heard but don't know much about forex trading, read further, to know what exactly forex is trading and what are the modalities involved. Forex or Foreign Exchange trading is the trading of currencies of different countries by brokers called forex traders at a market called the Forex market.
Through forex trading a broker aims to profit from the fluctuations in the foreign currency. When a forex trader buys currency, he is said to be 'long' on that currency and when he sells, that currency he is said to be 'short' on that currency. As the value of one currency increases rises or falls, traders decide if they want to sell or buy that particular currency.
In the forex market, currencies are often quoted in pairs, like GBP/USD, or USD/EUR. The first of this currency is base currency and serves as the basis for which you buy or sell. The second is the counter or quote currency. For example when you buy EUR/USD, you have bought EUR, by selling USD.
Forex trading is a very profitable way to make money, but it can be risky as well. You need to be aware of the latest currency rates. There are a number of tools that help you calculate the exchange rate. One such example is the currency calculator, which determines, the value that you would get in return for your investment.
Within the forex market, there are several small forex markets that trade in various currencies. The most commonly traded currencies are the USD, the Australian Dollar, the Japanese Yen, and the European Euro. The values of these would change according to the market that it is trading in. This is a 24 hour market, so the value of dollar can be different according to the market that it is in.
Getting started in forex trade is simple. You need to first choose an online broker who deals in forex trade. This is a very important choice, hence be very careful. Try and avoid the fly by night operators, who would lure you with all sorts of gimmicks. Remember the old adage, if something is too good to be true, it probably isn't! Choose a broker who has a clean reputation. Figure out how much money are you going to invest in a forex trading account. For those who are new, to the forex trade, you could choose from the many mini forex trading brokers. Through these platforms you can trade in smaller amounts and thus minimize the risk. They serve as a playground for the real battle ground. The next step is to open a trading account, by completing the requisite formalities.
