If you are new to trading Forex, or if you are interested in trading on this particular market, you need to know what it is and what it does before you start trading. What you don’t know can get you into trouble in the Forex market.
So what is Forex and how does it work? The market known as Forex is defined by the selling of foreign currency. This is a market that runs specifically on the trades of foreign currency. You buy and sell Forex by buying one currency and selling the other. These currencies are traded either through a dealer or broker and they are always traded in pairs.
When you are purchasing currency, think of it as buying a share into a particular country. This means that you are buying a share in a particular nation’s economy and the price of that currency will reflect the market thinking about the future and current health of the country in question. Unlike several markets, this particular market has no central exchange or a physical market. It is considered an interbank market as the market is run electronically. This process is run 24 hours a day. Forex was originally created to be a banker’s institution until the 1990’s.
However, that has all changed due to the growth of the internet. Now there are online Forex trading firms that will trade Forex with anyone and not just large institutions. Now, Forex is considered to be a “spot market”. A spot market is simply a market dealing with current prices of a financial instrument. That is the definition of a spot market. As stated before, you are trading in foreign money by buying or selling pairs of currency at any given point in a market day. One of the good things about the Forex market is that it never closes.
For example the London Market opens at 3 am ET and closes at 12 noon ET. Tokyo opens at 7 pm ET and closes and 4 am ET. New York opens at 8 am ET and closes as 5 pm ET. So you can see from these examples that the market runs continuously and trading is done every day of the year. This is the biggest financial market in the world and also is the most popular. Many people trade globally as do large institutions and banks from all around the world. So it is a rapidly thriving market.
Now what do you need to do to start trading in the Forex market? You need a computer with a high speed internet and information about Forex. You will also need to have either a micro account or a mini account to get started trading in the market. While some brokers will allow you to start with as little as $500, it is wiser to simply use either of these two accounts. The price for a micro account is $1000 while a mini account should be at least $10,000. Bear in mind these are starting amounts only. This is an introduction to Forex and what it is.