Understanding the Foreign Exchange Market

Posted by admin 11/02/2014 Comments are off 923 views

Intro to Foreign Exchange Market

This article provides useful information about the foreign exchange market to those who are interested in forex trading.

The foreign exchange market is the largest financial market is the world. Over four trillion U.S. dollars worth of foreign currencies are traded daily. Traders from all over the world participate in the forex market. There is no central location where forex traders meet to trade as can be seen with the stock market. Most of forex trading is done online and this is how traders from all over the world are able to participate in the forex market. Forex trading sessions are anchored in the major financial centres of the world like London, New York, Tokyo, Frankfurt, Singapore and Sydney.

If you are a forex trader is Singapore, you will not be restricted to your home trading session only. You can participate in any forex trading session anywhere in the world as long as it is open. All you need is a good internet connection to enable you access the markets. The foreign exchange market is always open round the clock during the trading week so you can log in to trade anytime of the day or night. This is made possible because the trading sessions are held in different time zones and their opening hours overlap. There is always a trading session open somewhere in the world at any time.

Currencies traded in the foreign exchange market

Currencies from all over the world are listed for trading in the foreign exchange market. Forex traders are free to trade in any currencies they fancy. The U.S. dollar is the most traded on the global stage, followed by the Euro, British pound and Japanese Yen. The Singapore dollar is also very popular especially in the South East Asian region. Forex traders tend to favour the currencies of their home countries alongside other currencies when trading. Therefore, expect the Asian markets to be dominated by Asian currencies and the big global currencies like USD, Euro and GBP.

Currencies are assigned different values in the foreign exchange market based on their perceived worth. In general, currencies from countries with strong, stable economies are more desirable and therefore tend to have strong values. These currency values change constantly in response to various market factors. The constantly changing forex market makes trading very tricky especially if you do not understand the markets well. Forex traders have to keep track of these changes in the foreign exchange market as it determines how they trade. They also have to understand what causes the changes so that they can anticipate them.

Understanding how the foreign exchange market works is the key to becoming a successful trader. There are factors that affect currency prices and the forex market in general. These factors are mainly related to the economy and include inflation rates, trade balances, interest rates and several others. There is a lot of information from the forex market that forex traders have to use in order to help them make meaningful trading decisions. As a forex trader, you must know how to read forex charts so that you get a good picture of how the market is performing. You should also be able to analyze and interpret various market indicators that will guide your trading decisions.

If you are planning to invest in the foreign exchange market as a forex trader, it is advisable to take time and learn the trade. Forex trading is not just about luck and guesswork. The market may be very lucrative but it is just as risky as other forms of investment. One wrong trading decision can wipe out almost all your investment. The foreign exchange market is known to get volatile sometimes so forex traders have to be ready to trade under different market conditions.



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