Forex Mentors

Whenever one currency is traded for another on the global market, this normally involves forex — the foreign exchange market. It is usually referred to as the currency or FX market. It is the largest financial market in the world and involves currency trading on the following levels:

- Central banks

- Currency speculators

- Financial markets and institutions

- Governments

- Large banks

- Multi-national corporations

Over $3 trillion in trading is daily in the global forex and other related currency markets. Unlike the various stock exchanges, the forex exchange operates differently. In a stock market everybody has access to all the same pricing of the various stocks. With forex, it is divided up relevant to levels of access.

In addition to the $3.21 trillion traded daily at forex, it is estimated that another $2.1 trillion is traded in derivatives. Derivatives are another form of financial instrument and their value fluctuates depending on changes in variables that are globally related. Examples of derivatives are forwards, futures, options, and swaps. The primary function or purpose of a derivative is the reduction of risk for a speculating party.

The $3.21 trillion is broken down into the following four groups of transactions:

1. $1.714 trillion in forex swaps an OTC derivative with a short-term interest rate

2. $1.005 trillion in spot transactions purchasing one type of currency with another wherein it is done as immediate delivery rather than in the future

3. $362 billion in outright forwards an agreement between parties to purchase or sell various assets at a future point in time that is pre-agreed upon

4. $129 billion in estimated gaps in reporting

In 1972, the Chicago Mercantile Exchange introduced futures contracts that were forex-exchange traded into the existing mix of financial instruments. These are traded in much the same fashion as futures on the stock market commodities market. According to the Wall Street Journal, the volume forex futures transactions have grown rapidly since their introduction, and now equate to roughly 7% of the daily traded volume.

There are three key factors that directly affect currency trading:

1. economic factors

2. market psychology

3. political conditions

The bottom line is that, just like with anything that is bought, sold, or traded, the aspect of supply and demand rules supreme and is always what most significantly creates price fluctuations in any type of market. For the most part, one has to look at the global currency market as a gigantic melting pot, in that things are always changing and shifting, and never static. It is a mixture of numerous ever-changing events, with supply and demand factors constantly changing as well, therefore resulting in shifts of the pricing of one currency relative to another.

There is an ongoing controversy involving currency speculators, as they are the group primarily responsible for any effects on currency devaluations and national economies. On the other hand, there are those economists who insist that the speculators are one of the more important factors in that they perform the function of providing a market for what are called hedgers — hedging removes or even cancel risk in investments.

With the current questioning on whether or not property [whether residential, buy-to-let, or industrial] is the place to invest at the present moment; the experts assessment that a further interest rate rise is on the cards; the large amounts of money required for any significant promise of profiting from shares, even if you pick the correct ones… and the costs involved; the gloom and doom in pension funds – are you looking for a bright spot?

The Currency Trading/Forex/FX markets could be that bright spot… after all billions are traded there on a regular basis, day after day, month after month, year after year.

It doesn’t matter whether you buy or sell, the potential for profit is there whichever way the market is headed.

Did you know that it is a TAX-FREE market? That it is relatively cheap to enter, especially when compared to shares? And that costs are extremely low?

It is quite easy to learn the ins and outs which you will need to know to make successful trades, if you don’t know anything about it in the first place, then a course will put you in the know. Don’t expect it to be difficult to learn and don’t be put off by the technical terms. They are extremely simple to pick up, you will find it interesting, riveting even, and the details of the actual amounts of money which are traded are guaranteed to be an eye opener.

Once you have learnt HOW to trade, you can sign up with an online trading platform… remember to take advantage of their FREE courses, tutorials, and most importantly their demo account.

Does this sound like an avenue worth exploring… get your research off to a resounding success… visit http://www.5thNovember.com for all the lowdown on the best courses and trading platform, plus free tips which you won’t want to miss.

This article has, of necessity, only been an introduction to the fascinating subject of currency trading. Newbies need a reliable source of introductory information, even the more experienced can benefit from study. There are numerous books on every aspect available… I’m sure you could find some at your local library. The only problem with this approach is that before you have done a basic introductory course, you could…

1. become overwhelmed, plus you wouldn’t understand the basic terms.

2. find the books rather ‘dry’ and hard-going in the extreme.

My advice, do a basic course first… then if you feel you want to expand your knowledge… follow the above option.

Remember, remember, the 5thNovember.com!

The currency trading business has always been, and will always be, a risky one! It does not matter whether the transactions are being conducted from the comfort of one’s home, or from a legitimate office–a study of market trends and organizations as well as the factors impacting prices, is advisable at the outset. After all, no one enters the trading arena with a desire to end up on the losing side!

Take a look at all the various components of currency trading–

(1) Names like Forex, Foreign Exchange, FX and Currency Exchange are quite familiar, but very few are aware of what they actually represent. To put it simply, they all deal with currency trading, that is, one currency being exchanged for another.

(2) Where the lending rate of a particular currency is concerned, it is decided by the central bank of that country. This is an overnight value. Should the interest rates go down, the currency’s value also lowers.

To counteract this, a process called “carry-trade” is put into action. Here, currencies going at lower interest rates are sold and currencies with higher interest rates are bought in their place. If the rate of interest is higher, naturally the value of a particular currency also goes up!

(3) The prices of various currencies are affected by different factors, a few of which can be inflation, industrial production and unemployment. These are known as macroeconomic factors. A poor economy leads to a high rate of unemployment. Along with depreciating the value of the currency, it also causes geopolitical events.

The trading community looks towards the economic data analysis to decide which market positions will bring in profits. So any information related to macroeconomic factors can be found from the analysis.

(4) The major people involved in currency trading include–financial markets, governments, financial institutions, multinational corporations, central banks and large banks.

A smaller percentage includes retail traders or small speculators. But they are not directly involved in this trade; they interact via banks or brokers. Unfortunately, they become the main targets whenever a Forex scam erupts!

Last, but not the least, are the individual investors. If they are not careful, they can be taken for a ride by people putting forward different trading schemes. They are easily taken in by the fact that foreign exchange markets promise great profits if handled properly.

(5) What does one do in currency trade?

The mechanics involved in FX are almost the same as those in other trade markets. It is actually quite a simple process, once the investor and trader get the hang of it.

Quote currencies are displayed in pairs, such as–EUR/USD, USD/JPY, and so on. The first listed currency (base currency) is the foundation for selling or buying. The second listed currency is the counter currency (quote).

To illustrate with an example, say the listed pair is EUR/USD. Euros are being bought while dollars are being sold–both at the same time. So if the value of the Euro goes up, the value of the US dollar is also bound to go up. What is to be kept in mind here is that foreign exchange takes place on the basis of lots, that is, 100,000 base currency units.

(6) There is another terminology that makes the rounds in this arena–trade volumes. The frequency with which any product is sold or bought, determines its liquidity in the market. This is what is meant by trade volumes.

(7) There are many reasons for currency trading to achieve this sort of popularity–

(a) This is the most liquid market in the world today, since it enables quick selling and quick buying of any particular item. Thus, major price rises or price falls cannot affect the commodity. Also, its own price will not fluctuate so much. FX is a reference to market liquidity. The biggest advantage is being able to conduct transactions via the Internet from home.

(b) If the trader is sharp enough, he/she can dispose off the currency pair that has the possibility of undergoing a reduction in value, before anything else. This ensures definite profits.

(c) FX has other features like–lengthened trading hours, going up to 24 hours a day on weekdays (weekends are not included); geographical dispersion; plenty of traders and varied types; and different factors that have an impact on exchange rates.

(8) As far as the trade business is concerned, a currency exchange or foreign exchange market is viewed as the largest global market; it trades cash values.

Currency trading is dependent on a set price that is named as exchange rate. It is beset with risks, but if the game is played correctly, can yield huge profits too! Ultimately, it all depends on the investor!