Introduction to Forex

The market FX

The Forex market, a term created by the contraction of Foreign Exchange, said often FX, is the largest, liquid and transparent financial market in the world. The average turnover exceeds 2 thousand billion dollars daily, while all U.S. stock markets does not reach the 3% of the total traded in the Forex. Unlike other financial markets by most of which can benefit only when they are rising in a Forex trader can open simultaneously a long position (purchase) on a currency and short (selling) on another, which means that unlike other financial markets, the Forex offers opportunities to gain much more numerous. Basic Concepts

The operation of Foreign Exchange is the simultaneous exchange of one currency into another. Since currencies are traded in pairs to win on a given exchange rate should buy the currency expected to rise and sell the other. For example, if you believe the euro (EUR) increase against the dollar (USD) will buy EUR / USD, in other words buy euros and sell dollars. Conversely, if you believe the euro against the dollar arretrerà then sell EUR / USD ie sell euros and buy dollars. It ‘clear that there is no need to wait for the market is rising to earn, any time a currency grows over another. The Forex then produces continuous investment opportunities. Those who work in Forex?

We can define two categories of traders: hedgers and speculators. Among the first we have some government agencies, companies import / export and investors usually exposed to a “foreign exchange risk.” A negative trend between their currency compared to foreign currency counterparty in business (in the exchange of goods and services) can damage considerably. These represent the core of Fx trading although constitute only 5% of the market today.

Then we have the speculators, a group formed by banks, funds, FOREX or private companies that create an artificial currency exposure to benefit from changes or movements in price. Pairs currencies

Each currency is shown as a symbol of 3 letters. The currencies are traded in pairs and displayed as such. The first currency shown is the one “base” or “guide” or “primary currency”, the second refers to the “secondary currency.” The “pair of currencies” is followed by a number, usually composed of five digits. The number represents the ratio of one currency against another, and can be read as “the amount of the second currency necessary to have a main unit of currency.” Bid / Ask or Buy / Sell

The currency pair is always followed by two numbers, the first has a value lower than the second. The first figure is known as “Bid” or “Sell” (selling price) while the second is known as “Ask”, “Offer” or “Buy”

(purchase price). The number smallest Bid (Sell) represents the price at which you can sell the currency to buy the main and secondary currency. The second price, Ask (BUY) is the price they buy the main currency and sell the currency secondary.