|
FOREX
TRADING
Forex Trading is trading currencies
from different countries against each other. Forex is acronym of
Foreign Exchange.
For example, in Europe the currency in circulation is called
the Euro (EUR) and in the United States the currency in
circulation is called the US Dollar (USD). An example of a forex
trade is to buy the Euro while simultaneously selling US Dollar.
This is called going long on the EUR/USD.
HOW FOREX TRADING WORK?
Forex trading is typically done through a
broker or market maker. As a forex
trader you can choose a currency pair
that you expect to change in value and place a trade
accordingly. For example, if you had purchased 1,000 Euros in
January of 2005, it would have cost you around $1,200 USD.
Throughout 2005 the Euro’s value vs. the U.S. Dollar’s value
increased. At the end of the year 1,000 Euros was worth $1,300
U.S. Dollars. If you had chosen to end your trade at that point,
you would have a $100 gain.
Forex trades can be placed through a broker or market maker.
Orders can be placed with just a few
clicks and the broker then passes the order along to a partner
in the Interbank Market to fill your
position. When you close your trade, the broker closes the
position on the Interbank Market and credits your account with
the loss or gain. This can all happen literally within a few
seconds. |