Learn Forex - Online course for new traders
FOREX TradingCharts.com

Learn Forex - Online course for new traders

Introduction

The word "forex" is a contraction of the words "foreign exchange"; it is sometimes abbreviated further, and simply called "FX". Forex provides opportunities for speculation, and that is likely what stimulated your curiosity.

Forex is simply the trading of currencies. In its broadest sense, forex includes all commercial and speculative buying and selling of all the world's currencies, making it the largest market in the world. In a forex trade, one currency is purchased while another currency is simultaneously sold; in other words, one currency is exchanged for the one being bought. The term forex properly refers to all currency trading done anywhere in the world; however, in practice, and in the context of this website, the word is often used to refer specifically to the trading of currencies by speculators.

Astoundingly, the forex market has tripled in size from $1.1 trillion traded per day to $3.2 trillion per day in just over 10 years, and it has only been widely operating for about 20 years, according to the most recent Triennial Survey of the Bank for International Settlements. By comparison, all of the stock exchange activity worldwide is about $2.8 billion per day or about 10 times smaller.

Forex speculation involves risk, and inherent in risk is potential profit; the more at risk, the more potential profit.

The forex market is huge: truly a global marketplace, operating all the time, with just a brief cooling off period on weekends. Due to this size and global scope, prices can be observed and traded, but not easily manipulated.

Forex rates can be affected by events in your backyard or anywhere in the world. When such events affect the value of a currency, the currency value can often tend to trend in a particular direction for a period of time. Analysis of historical forex market action in light of current market conditions (known as technical analysis), possibly combined with consideration of global events and markets (fundamental analysis) can help the forex speculator gain insight into currency markets that might allow the trader to project future price movements. However, such insight and potential success in forex speculation requires experience, commitment, discipline and a perhaps a special type of intelligence, and will come only at an investment in time, experience and financial loss. forex trading is not for everyone, but it can afford an opportunity for excitement and profit for the right person.

Where Does Forex Trade?

Particularly for private speculators, forex trading occurs online. Most private forex traders participate from home or office, over their Internet-connected desktop or laptop computers. In fact, the Internet helps explain the dramatic growth of foreign currency speculation. Individual traders, perhaps just like you, all over the world can participate in this online market. Traditionally, futures and equities trading only occurred in established exchanges, where parties can meet and agree to a trade. Over time, these exchanges have become subject to stringent regulations to monitor and moderate activity. Forex is termed "off-exchange trading", or "OTC" (over-the-counter) as each party deals directly with each other, where ever they may be. With this freedom comes some risk, As well, it is subject to very limited regulations.

How Does the Forex Market Work?

Until the 1970's, and for the previous 100 years, the value of most currencies was tied in some way to the value of gold. In 1944 this "gold standard" was replaced by the Bretton Woods Agreement which valued the United States dollar against gold, and all other currencies against the US dollar. In 1975 that agreement fell apart and a system of floating exchange rates was widely adopted, leading to fluctuations in currency values in an open market-and laying the foundation for foreign exchange speculation.

Today, trading in foreign currencies by speculators usually takes place through a forex broker or dealer, who provides the trading platform to transact forex trades. Such trades occur in currency pairs, such as USD/JPY (United States Dollars/Japanese Yen). Note that two currencies are always involved in a forex trade, with one being purchased while the other is being sold.

The forex trader will generally hold the purchased currency (called a position) for a period of time, intending to profit when the prices of the two currencies change favorably. The transaction is completed, or the position is closed, when the opposite currency is bought and the other sold. Profit is calculated by the difference in the buying and selling price.

Different brokers offer different services, and traders need to be careful their broker is serving their best interests. Each broker provides demonstration or practice accounts, where a new trader can play with virtual money until they feel comfortable opening a real account. Analysis can be completed and orders are placed online, at the trader's request.

Why Trade Forex?

The profit potential is why participants enter the market. But why would a speculator choose to trade forex instead of equities or futures?
Forex offers several advantages over speculative trading in futures, stocks and other equities. Eight major currency pairs dominate most currency trading, so it is a much simpler market to follow for most traders. The vast majority of trades involve the United States Dollar, while the Euro, British Pound and Japanese Yen are also widely traded.

Although most currency speculation occurs between a relatively small number of currencies, many brokerages offer trading in a much wider range of less commonly-traded currencies.

Some prospective traders looking to participate in speculation are attracted by the low account balances required to open a forex account with some brokerages.



Please read on through the remaining topics of this forex education section to learn more.

LEARN FOREX TRADING ONLINE

1. What is Forex

In its broad sense, forex includes speculation and...More»

2. Why Trade Forex

Forex markets offer unique trading opportunties...More»

3. Forex Trading Basics

Currency pairs, hours, leverage. What is a pip?...More»

4. Getting Started in Forex Trading

As with any new venture, a reasoned approach to...More»

5. Charts and Quotes

Understand these vital tools in the trader's kit...More»

6. Mechanics of Forex Trading

Entering and exiting forex trades are an essential...More»

7. Interest and Carry Trade in Forex

How interest impacts forex trading. What is Carry?...More»

8. Fundamental and Technical Analysis

Which approach is right for the forex trader?...More»

9. Opening a Forex Account

What to look for in a forex broker, and how to...More»

10. Risk Management

This can be the difference between success and...More»

FOREX GLOSSARY

A
AppreciationArbitrage
AskAsset
At BestAUD
AussieAustralian Dollar
Authorized DealerAutomated Trading System
B
Balance of PaymentsBalance of Trade
BandBank of Canada
Bank of EnglandBank of Japan
Bank RateBar Chart
Base CurrencyBasis Point
BasketBear
Bear MarketBid
Bid/Ask SpreadBig Figure
BoCBoE
BoJBollinger Bands
BrokerBuck
BullBull Market
BundesbankBuy Limit Order
Buy On Margin
C
CableCAD
Canadian DollarCandlestick Chart
CarryCarry Currencies
Carry TradeCash Market
Cash on DepositCBI
CCICentral Bank
Central Bank of IraqChartist
CHFCleared Funds
Closed PositionCommission
Consumer Confidence Index (CCI)Consumer Price Index (CPI)
Conversion RateCopey
CorrelationCounterparty
CPICross Rate
CurrencyCurrency Code
Currency PairCurrency Risk
D
Day OrderDay Trade
Day TraderDealer
Dealing DeskDealing Systems
DeficitDeflation
DeliveryDelivery Risk
Demo AccountDepreciation
Depth of MarketDevaluation
DinarDiscount Broker
Dollar RateDomestic Rates
Donchian ChannelDrawdown
Durable Goods Order
E
ECBECB Conferences
ECN BrokerEconomic Indicator
EquitiesEquity
Escrow AccountEUR
EuriborEuro
European Central BankEuropean Monetary Unit
European UnionExcess Margin Deposits
ExchangeExchange Rate
ExecutionExit
ExoticsExpiration Date
Exposure
F
Factory OrdersFast Market
Fed MeetingsFederal Deposit Insurance Corporation
Federal Funds RateFederal Open Market Committee
Federal ReserveFederal Reserve Board
FedsFill Price
Fiscal PolicyFixed Exchange Rate
Flexible Exchange RateFloating Exchange Rate
Foreign ExchangeForeign Exchange Center
ForexForward
Forward RatesFranc
Full-Service BrokerFundamental Analysis
FundamentalsFX
G
G7G8
GapGBP
GearingGood Until Cancelled
Great Britain PoundGreenback
Gross Domestic ProductGross National Product
H
HedgeHedge Fund
HolderHometrack Housing Survey
I
IMMIndicative Quote
Industrial ProductionInflation
Initial MarginInitial Margin Requirement
Interbank MarketInterest Rate
International Monetary FundIntra Day Position
IQDIraqi Dinar
ISM Manufacturing IndexISM Non-Manufacturing
J
Japanese YenJPY
K
Kiwi
L
Large Retailers SalesLeverage
LIBORLimit Order
Limit PriceLine Chart
Liquid MarketLiquidity
LongLoonie
Lot
M
M-o-MM1
M2M3
M3 Money SupplyM4 Money Supply
Maintenance MarginMajor Currency
MarginMargin Call
Mark To MarketMarket Close
Market MakerMarket Order
MaturityMini Account
MomentumMonetary Easing
Monetary PolicyMoving Average
MXN
N
Narrow MarketNet Consumer Credit
Net PositionNew Zealand Dollar
NZD
O
OfferOne Cancels The Other Order
Open OrderOpen Position
OrderOver The Counter
OverboughtOvernight Limit
Oversold
P
Partial LotPetrodollars
PIPPMI Manufacturing
PositionPound Sterling
PricePrime Rate
Principal ValueProducer Price Index
Profit Taking
Q
QuoteQuote Currency
R
RallyRange
RateRate of Return
Reciprocal CurrencyRegulated Market
ResistanceRetail Sales
Risk CapitalRisk Management
Roll Over
S
Sell Limit OrderSell Stop
SettlementShort
SlippageSNB
SpeculationSpike
SpotSpread
SterlingStop Loss Order
Stop OrderSwiss Franc
Swiss National BankSwissy
T
Technical AnalysisTechnical Indicator
The PoundTrade Balance
Trading PlatformTransaction
Transaction CostTrend
U
U.S. DollarUndervalued
Unemployment RateUnited States Dollar
UptickUS Dollar Index
US TreasuryUSD
V
ValuationVolatility
W
Wholesale Prices WTO
Y
Y-o-YYard
YenYield
Z
ZAR 
These pages, and all content ©TradingCharts.com Inc and other copyright holders. Permission is not granted to redistribute charts, data, news or other information found on this site, in any manner. Although it is believed that information provided is accurate, TradingCharts will not accept liability for any loss or damage that may arise from use of the content, inability to access the website, or delay or failure of receive of any information provided through this site.