Forex Tutorial: What is Forex Trading?

Understanding Forex Trading for Beginners

forex trading

What is forex? The forex market is a decentralized global market where its participants exchange currency. This currency exchange transaction occurs daily with a trillion dollar transaction volume. It is the most liquid market in the world.

Many people claim to earn extra money from forex trading. You may be wondering what it is actually and how we work it out. The entire details on this trading are many and you need some time to master them all. You also need some time for training and experience before you can finally make a real money account and trade.

Forex trading focuses on commercial trading on currencies exchange. Currency exchange happens all the time based on demand and the value or price keeps on changing from time to time. To trade on this market, we don’t have to be in a certain place. Traders commonly make orders from their own computers. This is also why forex trader is the most favourite part time job on earth. Based on many major currencies and financial centers including New York, London, Tokyo, Sideny, Hong Kong, Singapore, Frankfurt, Paris, and Zurich, the market is practically active 24 hours a day and five and a half day each week.

There are basically three major markets on this forex trading. Each market trades differently and results differently. They also have different kind of traders. First, you get spot market. Spot market trades only on current value. Most individual traders trade in this market. They buy and sell currencies based on the very recent values. They profit from spread or pips among the currencies exchange. You can have an account and a professional trader to do the work for you. In this case, you need to spend some of your earned profit for commission and fees. We can also find broker who helps us making an account and trade with us.

The second is forwards market. This trade is commonly played by non-individual traders. They are commonly companies, organizations, and institutions. Unlike the spot market, forwards market trade not on current currencies. Traders basically made a deal and agreement on certain price per unit on a currency type on specific date. The terms in agreement are based on their preferences. Then, the trade is about the buying and selling process of the contract. This can be a little confusing, but this market search for profit in the future commonly for the sake of their companies importance.

Also read: How to start trading

The third is futures market. This is also well known already. This market is more like the combination of the first two markets. The traders are not individual traders. They trade on behalf of companies, institutions, and organizations. They buy and sell the contracts but not on customizable agreement and settlements. Rather, they trade on standard system on global market. Many companies are interested on this trade for additional financing as well as company strategies to survive competition.

This is the very fundamental of forex trading. You still need to learn on trade system, accounts, trade orders, analysis and strategies, and many more. This is not a gambling thing, but measurable and accountable trading. We need to learn the basics, factors, and systems. If you are interested in it, you should learn more and practice your trading skill.

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