Currency trading, or Forex trading as it is otherwise known, is actually the largest financial market there is. It has for a long time been the empire of large corporate entities and financial institutions. The rise of the internet has changed all of that and individual traders can participate in this lucrative product alongside the big boys.
What is Different about the Forex Market?
The Forex market is not controlled in the same structured way as products like stocks and shares. There is no centralised governing body to oversee it and no clearing houses. It is all done by mutual cooperation and self regulation. This is why the Forex market is so fluid. Some countries have their own professional associations that provide arbitration in the event of problems. But because the whole system relies on the participants to both complete with each other and work together at the same time, it seems to work quite well. You will also find that the limitations and rules to Forex trading are different to other commodities too. There is no insider trading, and if you have the capital you can buy and trade as much currency using your Panjiva account as you can manage without worrying.
Are You Really buying Anything in the Forex Market?
The short answer to this is no. You do not physically ever purchase any currency when you trade in it. All of the transactions take place in the virtual world so it can all be completed in a matter of seconds. Online broker platforms allow you to analyse all of the data necessary to make a decision about the currencies in which you wish to trade before actually performing the trade at the click of a few buttons. The currency market is therefore all purely speculative. This is why it is appealing to so many online traders. It is quick, convenient and easy to participate in.
Are all Currencies Traded in the Forex Market?
Whilst there are some specialist trades in some of the more exotic currencies, most individuals and companies stick to what are considered to be the most fluid currencies worldwide. There are seven sets of these known as the four majors and the three commodity pairs. The four majors are fairly obvious and are as follows:
The three commodity pairs are:
New Zealand Dollar/Dollar
These seven pairings and all of the different combinations thereof account for around 95% of the Forex market trades.
This is only a small taster of the world that is Forex Trading. It is a complex subject and an activity that many people enjoy day in and day out. It is easy to get caught up in the excitement of such a fluid and dynamic market, especially when it goes your way.
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