| |
| |
|
Investing Information |
|
|
|
Introduction To FOREX
The Foreign Exchange Market, better known as FOREX, is a worldwide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily exchanges are worth approximately $1.5 trillion (US dollars). In comparison, the United States Treasury Bond market averages $300 billion a day, and American stock markets exchange about $100 billion a day. The Foreign Exchange Market was established in 1971 when fixed currency exchanges were abolished. Currencies became valued at 'floating' rates determined by supply and demand. The FOREX grew steadily throughout the 1970's, but with the technological advances of the 80's FOREX expanded from trading levels of $70 billion a day to the current level of $1.5 trillion. Who Trades in FOREX? The FOREX is made up of about 5,000 trading institutions such as international banks, central government banks (such as the US Federal Reserve), and commercial companies and brokers for all types of foreign currency. There is no centralized location of FOREX; major trading centers are located in New York, Tokyo, London, Hong Kong, Singapore, Paris, and Frankfurt. All trading is done by telephone or Internet. Businesses use the market to buy and sell their products in other countries, but most of the activity on the FOREX is from currency traders who use it to generate profits from small movements in the market. Even though there are many huge players in FOREX, it is accessible to the small investor thanks to recent changes in the regulations. Previously, there was a minimum transaction size and traders were required to meet strict financial requirements. With the advent of Internet trading, regulations have been changed to allow large interbank units to be broken down into smaller lots. Each lot is worth about $100,000 and is accessible to the individual investor through 'leverage' loans extended for trading. Typically, lots can be controlled with a leverage of 100:1 meaning that US$1,000 will allow you to control a $100,000 currency exchange. Advantages to Trading in FOREX Liquidity - Because of the size of the Foreign Exchange Market, investments are extremely liquid. International banks are continuously providing bid and ask offers and the high number of transactions each day ensures there is always a buyer or a seller for any currency. Accessibility - The market is open 24 hours a day, 5 days a week. The market opens Monday morning Australian time and closes Friday afternoon New York time. Trades can be done on the Internet from your home or office. Open Market - Currency fluctuations are usually caused by changes in national economies. News about these changes is accessible to everyone at the same time--there can be no 'insider trading' in FOREX. No Commission - Brokers earn money by setting a 'spread'--the difference between what a currency can be bought at and what it can be sold at. How does it work? Currencies are always traded in pairs: the US dollar against the Japanese yen, or the English pound against the euro. Every transaction involves selling one currency and buying another, so if an investor believes the euro will gain against the dollar, he will sell dollars and buy euros. The potential for profit exists because there is always movement between currencies. Even small changes can result in substantial profits because of the large amount of money involved in each transaction. At the same time, it can be a relatively safe market for the individual investor. There are safeguards built in to protect both the broker and the investor, and a number of software tools exist to minimize loss. Ron King is a full-time researcher, writer, and web developer. Visit FOREX4U to learn more about this fascinating investment medium. Copyright 2005 Ron King. This article may be reprinted if the resource box is left intact.
MORE RESOURCES:
Google News |
|
|
|
RELATED ARTICLES
Creating Momentum with Options - Pro and Cons of At-the-money, In-the-money, and Out-of-the-money To create momentum in your options trading you need to understand the advantages and disadvantages of at-the-money options, in-the-money options and out-of-the-money options.An at-the-money option has both advantages and disadvantages over stock and in-the-money options. How To Find An Investment Advisor Do you think you need an Investment Advisor? Hold on before you answer because this is sort of a trick question. Also, I am definitely biased because I am an Investment Advisor. The Cost of Green Eggs and Ham Young readers know that March 4th is the birthday of Dr. Seuss. Chinas Inscrutable Currency Strategy Purpose: Expose Opportunities for Smart InvestorsThe move by China's central bank to drop the yuan's rigid peg to the dollar on the day of my return after a three-week trip to Asia left a host of questions unanswered. The basket of currencies that will allegedly determine the value of the yuan going forward was not disclosed. Use this Simple Trick its to Buy $100 Bills Direct from your Bank for only $97 Most People just don't understand the power of using their home as a Wealth Creation Tool. How many people do you know who have lived in the same house for 10, 15 or more years and have virtually no mortgage, You know the Type 'House Rich Cash Poor'. An Introduction to Offshore Investing Once upon a time, offshore investment strategies were spoken of in hushed tones. They were conversations restricted to the plush offices of private Swiss bankers, or a dinner table topic in the expensive playgrounds of the multi-millionaires. Mutual Fund Selection Made Simple By Indexing! Non-indexed mutual funds try to keep it secret that actively managed mutual very funds rarely do better stock market indexes. The higher fees of the managed funds really make it hard for these funds to out compete indexed funds. The Dreaded Direct Question (Please have a glass of water within reach before reading this article.)Your personal financial planning is the topic of discussion here today, but not quite yet. Why Should I Use Penny Shares to Build Wealth? A strategic question. Why indeed?1. What Age Should I Start Saving For Retirement? Ask this question to 100 people and you will receive 100 very different answers. The fact of the matter is there is no right age to start. Keep Stock Market Investment Profits Have you had one of those huge investment winners - a stock that went from $2.00 to $80. Invisible Mutual Fund Fees Erode Your Returns! Many investors think that investing in mutual funds is free. What nonsense! Funds collect more than $50 billion a year in fees from investors. Your Portfolio and "Old Ironsides" The USS Constitution first ventured into the waters in 1798. From there she became an icon of durability and success. Trend Following Trend following also called momentum trading is the simplest and safest method of stock market investing. It puts you in stocks and mutual funds that are going up and gets you out when they start down. Powerful Hidden Techniques Mystery Formula - The Covered Call Option Trading Buy-Write Strategy For better or worse, most option trading investors purchase stocks with the intent of holding their shares for an extended period of time.We do this mainly because the media and industry professionals have drilled into our heads, year after year, time after time, that it’s best to buy and hold. DXPortfolio: A Great Passive Investment of 25% to $40% per month First, I need to explain about e-currencies or digital currencies. DXPortfolio are based and supported by the supply and demand of e-currency. Rules for Simplified Employee Pension Plans better known as a SEP Plans A SEP is a special type of IRA. Under a SEP plan the employer creates an IRA account for each eligible employee, hence the name SEP-IRA. Short Term Savings Products When you invest, it simply means that you are putting your funds in products, in this case short-term savings vehicles, which will allow you to reap high financial rewards.Here is a list of the more common short term savings products you should consider investing in. The American Age of Inflation is Over "The American Age of Inflation is finished." So says economist Robert Samuelson in his December 2nd Washington Post column. The 8 Biggest Mistakes When Designing Portfolios - and How To Avoid Them Are you as good an investor as you think? Do you consider yourself a well-informed investor able to anticipate and avoid nearly all pitfalls associated with investing? Chances are, you are making one of the common errors that could cost you hundreds or even thousands of dollars, or worse yet, your financial independence, control and security."I see people making the same costly mistakes over and over," says Scott Frush, CERTIFIED FINANCIAL PLANNER and author of Optimal Investing: How To Protect and Grow Your Wealth With Asset Allocation (Marshall Rand Publishing; available by calling 1-800-247-6553).
|
