Global Forex Trade - An Introduction

Global Forex Trade - An Introduction

By Johnathan Cunnings

The foreign exchange market is a form of exchange trade at a global level. It provides global decentralized trading of international currencies, and it has become worldwide popular due to the fact that a trader only needs a software and an Internet connection. However, although it looks like an easy way of earning money through currency values' oscillations, it is more likely that any untrained person will lose their money in a second if he does not posses any notions of economy.

Currency market is the biggest market in the world, and according to Bank for International Settlements, the medium trade on the Forex market is valued to 3,200 billion dollars a day. Forex global trade is the closest to the ideal market model. There is a great number of traders, and because of the huge volume of the liquidities that are traded, it is almost impossible for a single trader to influence the prices on a long term.

The most traded currencies are the Euro, Swiss franc, American dollar, British pound, Japanese Yen, and Australian dollar. By using technical and fundamental analysis, the investor could achieve great profit by taking part in this global market.

One of the main dealers who take part in this are the Market Makers. They quote prices with which they are ready to buy or sell currencies, and thus form the market. The dealers may be speculative, because they can try to profit by anticipating oscillations in the exchange rates. Other participants in the global Forex trade are the brokers. They are not market makers, but rather act as mediators between market makers and highlight the best prices, while trying to find a correspondence between buy and sell orders.

Banks are the central authorities  such as the European Central Bank, Bank of England, Japan etc, and they enter the global market out of various reasons, such as raising or decreasing the value of their own currency, or help some other bank to do the same thing. Some other reason would be that the banks will want to cut out any undesirable fluctuation of the exchange rate.

It is important to keep in mind that going into the global Forex trade does not mean investing. Chances and strategies rather lead to gambling mechanisms, although you need to be properly trained in order to raise you chances of making profits in Forex markets. No matter what, the intermediary / mediator is always the one who wins.

It is essential to know that the exchange rate may vary according to different factors, such as the political situation, the interest rate, monetary and inflationary policy. The oscillations are not predictable and the market can distance itself from all your aims. This will affect the price of your Forex contract and the potential wins and losses. In a few of the EU countries, there are statistics which state that many retail investors have suffered massive losses on this market. This is why you must not invest money that you cannot afford to lose.

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