By Gerben Burgers
Foreign Exchange
The FOREX (an acronym for "foreign exchange"), is the exchange of one currency into another currency. Currencies are not traded on an exchange,but directly between (central) banks, multinationals, governments and financial institutions. For the most part, the Forex market consists of hedging positions and strategies of national and international multinational corporations. Suppose a company has a contract for the provision of goods, such as cars, in the future. The CFO (chief financial officer) of that business will protect himself from potential financial loss by hedging fluctuating exchange rates. Hedging means covering the risk of loss by future fluctuations of the exchange rate. This is because there is a period between the signing of the contract and the actual delivery of the goods, in this case cars. It is hedging that brings massive amounts of money to the forex market.
The Players
There are three types of players on the forex market. The first are those I described before: the hedger or commercial players. The second are the financial institutions such as banks and retirement funds. The third player on the market consists of individual retail traders. Retail traders are a fringe group within the complete forex market, but this does not make it an unimportant one. The institutes and retail traders are on the market to earn money, whereas the hedgers are there to cover future losses.
Prices
Forex trading is powered by prices mutually agreed on. The price of a currency also varies per bank or money broker. In practice these differences are minimal, however.
The Market
The complete forex trade totals more than $ 1.9 trillion a day,is about thirty times bigger than the total U.S. stock market and is still growing on a daily basis. Although there is no central exchange on the forex, the following are the great foreign exchange centres of the world: London with a market share of 34.1%, New York with 16.6% and Tokyo with 6.6%. The forex market is open twenty-four hours a day, the three major trading centres being active in succession. The currency market follows the sun, starting in London, followed by New York, Asia and London again a day later. The exchange opens on Sunday and closes on Friday night.
Currency Pairs
On the forex you always trade one currency against another. You buy one currency by selling another and you sell one by buying another currency. We always speak of currency pairs. For example, if the currency pair EUR / USD (Euro / US dollar) is at 1.5, this indicates the price of the Euro in dollars, in this case 1.5 dollars. 1 Euro will then cost 1.5 dollars in this example. The first currency of the pair is called the base currency. On Forex, the prices of the currencies are usually displayed in 4 decimal places. In this case, the price of the EUR / USD is displayed as 1.5000, with the last decimal place (1.5000) as the smallest 'tick' value in the market. This smallest value is called a P.I.P. (Price Interest Point). A change in price of a currency pair is therefore indicated in the number of pips.
Example:
The EUR/USD changes in price from 1500 to 1504, which means an increase of 4 pips for this currency pair.
Currency Majors
Of course, there are countless currencies in the world that can be traded. We focus only on the currencies which have the most price activity. These are the so-called currency majors. The currency majors are: US Dollar (USD), Euro (EUR), British Pound (GBP), Japanese Yen (JPY), Swiss Franc (CHF), Canedian Dollar (CAD), Australian Dollar (AUD), New Zealand Dollar (NZD). It shows that over 85 percent of the total forex market consists of a currency combined with the U.S. dollar. The most traded currency pairs are: EUR/USD, with a 27% share USD/JPY, with a 13% share GBP/USD (also known as 'sterling' or 'cable'), with a 12% share.
Bulls And Bears
When a currency increases in value compared to other currencies, we speak of a 'bullish' or 'bull' market. When the value of the currency decreases, compared to other currencies, we speak of a 'bearish' or 'bear' market. In other words, an increasing price is called bullish and a decreasing price is called bearish. There is a constant imaginary battle between the bulls and bears. The bulls attack with their horns in an upward motion, whereas the bears attack with their claws in a downward motion. This metaphor refers to the buyers and sellers on the currency market: the bulls represent the buyers and the bears represent the sellers.
The author runs a website that provides forex trading signals and forex training. For more information visit [http://www.fxmsignals.com]
Hello I am Gerben Burgers. I have been active as a day trader on the forex markets for years now. One of my trading mentors is a former hedge fund manager from the United States, who is now very successful trading his own accounts. So he is an insider, who knows how the professionals work. This man taught me his tactics and entrusted me with them. I now want to learn them to you. On my website I give you daily forex trade signals combined with forex training so you can get an understanding of professional trading and make money at the same time. Visit [http://www.fxmsignals.com] for more information or e-mail me at info@fxmsignals.com
Article Source: http://EzineArticles.com/?expert=Gerben_Burgers
The FOREX (an acronym for "foreign exchange"), is the exchange of one currency into another currency. Currencies are not traded on an exchange,but directly between (central) banks, multinationals, governments and financial institutions. For the most part, the Forex market consists of hedging positions and strategies of national and international multinational corporations. Suppose a company has a contract for the provision of goods, such as cars, in the future. The CFO (chief financial officer) of that business will protect himself from potential financial loss by hedging fluctuating exchange rates. Hedging means covering the risk of loss by future fluctuations of the exchange rate. This is because there is a period between the signing of the contract and the actual delivery of the goods, in this case cars. It is hedging that brings massive amounts of money to the forex market.
The Players
There are three types of players on the forex market. The first are those I described before: the hedger or commercial players. The second are the financial institutions such as banks and retirement funds. The third player on the market consists of individual retail traders. Retail traders are a fringe group within the complete forex market, but this does not make it an unimportant one. The institutes and retail traders are on the market to earn money, whereas the hedgers are there to cover future losses.
Prices
Forex trading is powered by prices mutually agreed on. The price of a currency also varies per bank or money broker. In practice these differences are minimal, however.
The Market
The complete forex trade totals more than $ 1.9 trillion a day,is about thirty times bigger than the total U.S. stock market and is still growing on a daily basis. Although there is no central exchange on the forex, the following are the great foreign exchange centres of the world: London with a market share of 34.1%, New York with 16.6% and Tokyo with 6.6%. The forex market is open twenty-four hours a day, the three major trading centres being active in succession. The currency market follows the sun, starting in London, followed by New York, Asia and London again a day later. The exchange opens on Sunday and closes on Friday night.
Currency Pairs
On the forex you always trade one currency against another. You buy one currency by selling another and you sell one by buying another currency. We always speak of currency pairs. For example, if the currency pair EUR / USD (Euro / US dollar) is at 1.5, this indicates the price of the Euro in dollars, in this case 1.5 dollars. 1 Euro will then cost 1.5 dollars in this example. The first currency of the pair is called the base currency. On Forex, the prices of the currencies are usually displayed in 4 decimal places. In this case, the price of the EUR / USD is displayed as 1.5000, with the last decimal place (1.5000) as the smallest 'tick' value in the market. This smallest value is called a P.I.P. (Price Interest Point). A change in price of a currency pair is therefore indicated in the number of pips.
Example:
The EUR/USD changes in price from 1500 to 1504, which means an increase of 4 pips for this currency pair.
Currency Majors
Of course, there are countless currencies in the world that can be traded. We focus only on the currencies which have the most price activity. These are the so-called currency majors. The currency majors are: US Dollar (USD), Euro (EUR), British Pound (GBP), Japanese Yen (JPY), Swiss Franc (CHF), Canedian Dollar (CAD), Australian Dollar (AUD), New Zealand Dollar (NZD). It shows that over 85 percent of the total forex market consists of a currency combined with the U.S. dollar. The most traded currency pairs are: EUR/USD, with a 27% share USD/JPY, with a 13% share GBP/USD (also known as 'sterling' or 'cable'), with a 12% share.
Bulls And Bears
When a currency increases in value compared to other currencies, we speak of a 'bullish' or 'bull' market. When the value of the currency decreases, compared to other currencies, we speak of a 'bearish' or 'bear' market. In other words, an increasing price is called bullish and a decreasing price is called bearish. There is a constant imaginary battle between the bulls and bears. The bulls attack with their horns in an upward motion, whereas the bears attack with their claws in a downward motion. This metaphor refers to the buyers and sellers on the currency market: the bulls represent the buyers and the bears represent the sellers.
The author runs a website that provides forex trading signals and forex training. For more information visit [http://www.fxmsignals.com]
Hello I am Gerben Burgers. I have been active as a day trader on the forex markets for years now. One of my trading mentors is a former hedge fund manager from the United States, who is now very successful trading his own accounts. So he is an insider, who knows how the professionals work. This man taught me his tactics and entrusted me with them. I now want to learn them to you. On my website I give you daily forex trade signals combined with forex training so you can get an understanding of professional trading and make money at the same time. Visit [http://www.fxmsignals.com] for more information or e-mail me at info@fxmsignals.com
Article Source: http://EzineArticles.com/?expert=Gerben_Burgers
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