What’s traded on the Forex, anyway?

By this time, almost everybody is aware that money is traded through Forex.

Yes, money.

Euros, dollars and yens alike are traded on the Foreign Exchange market at a tune of roughly 3 billion dollar a day. There should be enough for you to squeeze out a few thousand buck a month, shouldn’t there?

More seriously, Forex trading is the simultaneous buying of one currency and the selling of another. You buy some, you sell some and you try to have enough, at the end of the day, to award yourself a paycheck. A really big one, hopefully.

Currencies are traded in pairs through a Forex broker (or dealer, whichever). It means that, over time, you could become an expert of a particular pair, like the euro and the US dollar (EUR/USD) or the British pound and the Japanese Yen (GBP/JPY).

Canadian traders usually go for the US and CAD dollar pair (USD/CAD).

Some people get dizzy when they’re not buying “physical stuff” which they can hold in their hands. For these people, Forex trading can quickly get too confusing. If you’re not like that and you’re at ease with number swapping many hours a day, Forex could be your game so read on.

You need to wrap your head around the idea that when you buy some currency, it’s akin to buying a share from a given country. When you buy Canadian dollars, for instance, you’re in effect buying a share in the Canadian economy.  It’s because the price of a currency is a direct reflection of what the market thinks about the current and future health of that country’s economy.

Generally speaking, a currency’s exchange rate versus all others reflects the (true or perceived) condition of that country’s economy, compared to other countries’ economies.

Unlike other financial markets such as the NYSE, established on New York’s Wall Street, the Forex spot market (or cash market) has neither a physical location nor a central exchange. The Forex market is considered to be an Over-the-Counter (OTC) or ‘Interbank’ market, due to the fact that the entire market is run electronically, within a network of banks, continuously and over a 24-hour period.

Does this sound like the kind of market you’d like to play some of your hard-earned money? For some, the answer could be “yes” but if this sounds too risky for you, it’s because it is. However, the potential rewards are so considerable that smart people, like you, from all over the world, spend lots of time learning about the Forex because even though it looks like a jungle, from the outside, it’s actually something most people can venture into and eventually win at.

After all, the Forex market was intended for bankers and they’re the richest folks around. Maybe you too should pick up on their favorite trade market, too!

There’s not much stopping you to enter the Forex market, nowadays. Say thanks to the internet because until the late 90’s, you needed to come up with between 10 and 50M$ to even start trading. That was a serious barrier to entry for “normal people” but it’s not like that, anymore. Online Forex trading firms (run by brokers) now offer trading accounts to “retail” traders (like us). That’s wonderful news.

Get yourself a good computer, a large LCD display, a wickedly fast internet connection and you’ll be ready to experience the Forex market, through the broker you prefer. If you’re a newbie, you should always start with a “demo account” since you can’t lose any money with it.

Once you get a feel for how things work with your particular broker, you can take your account live and make real transactions.

It’s a huge game and you can win at it using different strategies. That’s what makes it so exciting for some traders who can be creative in the way they play the Forex market.

So if you want to trade money, the place to be is the Forex market.

Tags: forex, foreign exchange, money, markets, trading, trades, traders, bankers, brokers, brokerage, forex broker, demo forex account, live forex account, buy shares, sell shares, buy money, sell money, currency pairs, usd, cad, eur, gbp, jpy, otc