The foreign exchange market – better known as FOREX – is the largest market in the world and over a million people buy and sell in the market every single day from across the globe. In this guide we shall look at what some of the most essential FOREX trading information.

What is the FOREX?

As we said before – the FOREX is the largest financial market in the world – and it handles over $1.3 trillion worth of transactions every single day. The immensity of this can be realized when we notice that the sum of all the American stock exchanges combined only reaches $100 billion a day.

It is because of the huge volumes and quick turnover of transactions that makes the FOREX so liquid. There are always buyers and sellers somewhere in the world to trade with.

Primarily the FOREX is a short term market which very much differs from other markets out there such as the stock market. In many markets people will make long-term investments and the time frame between buying and selling assets can be several weeks, months of even years. However, in the FOREX the majority of traders enters and exit a deal within a 24-hour period – many within a matter of minutes.

Advantages of FOREX Trading

There are numerous advantages to FOREX trading over other markets, some of which we have looked at below.

The FOREX is not based in any one location – it is a global market – and because of this it is open 24 hours a day, five days a week. The FOREX opens in Sydney, Australia on Monday morning (or Sunday afternoon New York time) and closes at on Friday afternoon New York time. This offers traders many more opportunities to invest and profit. Most other stock markets are open just 7 hours per day.

As we mentioned before, it is a highly liquid market – meaning there are always people to trade with. This can be seen as a disadvantage though as fluctuations in currencies can occur within seconds so you have to get in fast and stay alert to all changes in the currency exchange rates.

FOREX trading is generally less risky than trading in other markets as well – as there are several built-in safety nets within the trading system.

Transactions done through the FOREX are also commission-free. Foreign exchange brokers do not take a commission but instead set a spread – which is the difference between what a currency can be bought and sold at. In other markets traders have to pay a commission to the brokers for each futures transaction that they enter into.

How to Trade in the FOREX market

FOREX trading can be very rewarding, yet it is essential that you know what you are doing before you dive in the deep-end. Before beginning FOREX trading it is important that you do your research. The more you know about the currencies and countries that they come from that you want to trade – the higher your chances of success. Some of the factors you should research include: trade and budget deficits; Gross Domestic Product; central-bank interest rates, inflation and growth rate amongst other things.

The majority of people these days trade online – and to do so you must first open a FOREX account which is very simple to do. By doing this you will gain access to a trading platform on which you can choose the two currencies you want to trade between and the amount you wish to trade. The most common and secure currencies to convert are between the U.S. Dollar, Japanese Yen, Swiss Franc, British Pound, Euro, Canadian Dollar and the Australian Dollar. However you have the option to trade in any foreign currency that you wish.