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On the Forex market (Foreign Exchange Market) Currencies are bought and sold in real-time. The Forex market is one of the largest of the world. Forex allows people to trade currencies and earn money by predicting the course of the value of currencies over a certain period of time. (eg 15 minutes after the original investment) One might expect that at for example at 4 PM the US Dollar will be worth more than the euro, and thus make money.


The Forex market is the world's largest financial market and everyone from the age of eighteen can trade on the Forex market. Forex trading might be a bit complicated at first. But once you master the basics the ball will start rolling. The first thing to remember is that the first currency of a pair is always the “Base currency” And this is usually the US dollar.

Most traders will use the US dollar as their base currency and pair it with a different currency such as the Japanese yen. When we take a look at the exchange rate of the USD/JPY it could say 2.34 and this means that 1 US Dollar is worth 2.34 Japanese Yen.

Given that the US dollar is the base currency and the exchange rate goes up, the value of the dollar compared to its pairing will rise accordingly. If at the beginning of the time period the exchange rate is 2.34 and at the end of the time period it is 2.50, the Dollar has become more valuable. Sometimes the Dollar can also be the weaker currency – also known as the “counter currency” This is the case when the English pound or the Euro is paired with the US Dollar. (EUR/USD or GBP/USD)

Some Forex Basics:


* The first currency in a currency pair is the 'base currency'.
* The US dollar is usually the base currency. Traders will generally exchange US dollars for another currency, also called the 'counter currency'.
* Currencies are registered in pairs. A pair of the US dollar and the Japanese Yen, can be recorded as "USD/JPY =2.5” this means that you can buy 2.5 Japanese yen at the price of one US dollar.
* When a value rises, the base currency goes up in value, while the counter currency drops. As an example: If the USD/JPY exchange rate is 2.5 and climbs to 2.6 later on the day, the dollar become more valuable. (You can buy 2.6 Japanese yen at the price of one US dollar)

The perils and advantages of Foreign Exchange


We already know that the foreign currency exchange sector is very successful; thanks to factors such as variability, size and global structure which have contributed to the success. The Forex market is the most liquid market in the world. People who wish to invest and hold a Forex position many times bigger than their own account can do so without having to worry about it having an effect on exchange rates. The margin to do this is fairly narrow which makes holding larger positions accessible for more people. An example: a Forex trader can hold a Forex position worth US$100,000 in their account by placing a small deposit such as US $1000 and asking a Forex broker to back them up.

Investing in big Forex positions generates a great deal of leverage. This leverage functions as a double-sided coin; people who invest can receive huge profits from a small price changes, however there is also a loss-risk. The Forex Market will always harbor risks, but high leverages are very profitable and this is what keeps customers interested.

The currency market is really the only market that is available 24/7 and guarantees a good liquidity. It is an ideal trading market for people with a busy lifestyle. By looking at the figure below you will notice that large hubs of trading are located in various time zones. This means you will hardly ever be in a position where you can not make a trade because the market is closed! When the US exchange closes, the eastern markets only just start! This enables you to trade throughout the day.

Time ZoneTime (ET)Opens-Tokyo7:00 PMCloses-Tokyo4:00 AMOpens-London3:00 AMCloses-London12:00 PMOpens-New York8:00 AMCloses-New York5:00 PM


The Forex market offers enthralling experiences, although the risks attached are often larger than when dealing in equities. The forex market has very high leverages. Ultimately, this can go terribly wrong, and you could lose a lot of money – or even your entire trading account – within a very short period of time. As a beginning trader, it is very important to understand these things to prevent yourself from going down because of the quick currency rate changes. The rates change with a very fast rate due to huge cash amounts along with the numerous players involved and the people trading react quickly to any information that comes out.




Based on percentages currencies do not shift as fast as equity does (the stock of a company can devalue in a short more info period after a small drop) There is a huge leverage in the click here currency market and this creates variability. If you have a 100:1 leverage on a $1000 investment, then you have $100,000 in your control. If you exchange $100,000 into another currency and the value changes 1% in the wrong direction the capital will devalue, leaving you with $99,000 - a loss of $1000. This $1000 is the amount of your initial investment, so this means you have made a total loss of 100%.




A lot of people trading on the equity market equity do not consider leverage when they build their strategy. This means that they only lose $10 with an initial investment of $1000 combined with a 1% value change. So thinking about the risks involved when dealing on the Forex market is very advisable before you actually start trading.



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