Forex Trading Basics

Forex has become the largest and fastest-growing market that there is and has a daily turnover greater than $2 trillion.

One of the most attractive things about trading Forex has to do with its gigantic level of turnover every single day.  Forex is a super-liquid market and that means getting into and out of trades can be done quickly and easily.

Forex has tremendous leverage.  $1000 can be used to control a Forex contract valued at $100,000.  That’s a leverage ratio of one to 100 and that is gigantic.  This means a huge profits can be had starting with only a modest amount of working capital.  On the flip side of the coin of course leverage would have the opposite effect.

Forex trading is a speculator’s paradise.  Over 95% of all Forex trading is from speculation.

Trading is always done in currency pairs.  One very popular currency pair is the EUR/USD.  When the price of this currency pair rises it means that the Euro has increased in relation to the USD.  This doesn’t mean that the first component , the Euro has to increase in order for the EUR/USD to go up, it simply means that the ratio must change.  This means that the EUR/USD can go up in either of two ways.  The price in currency pair could increase if the Euro stays the same and the USD decreases or the Euro goes up and the USD stays the same or decreases. The prices of various countries’ currencies is constantly changing and this provides many opportunities for speculators.

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