The foreign exchange currency market is the largest financial market in the world. With an average trading volume of about $2 trillion a day, it dwarfs the mere $25 billion daily volume of the New York Stock Exchange.
Often referred to as “Forex” or “FX” trading, foreign exchange currency trades involve the simultaneous purchase of one currency and sale of another. Currencies are traded in pairs. For example, you may trade the Euro against the US dollar.
In essence, you will be trading one nation’s currency for a position in the currency of another country. The purchase of a nation’s currency is equivalent to taking a position consistent with their economic growth. The market’s perception of a nation’s economy is directly reflected in it’s valuation of the country’s currency. If you buy the Bristish pound, you are in effect buying a share in the British economy with the belief that their economy will expand in comparison to the economy of other counties.
The Forex has no physical exchange or central market. Instead, it is an Over-the-Counter (OTC) or ‘Interbank’ market. The entire market is run electronically, within a network of banks. The market is available continuously open. This 24-hour market is achieved by a transitioning of trading activity around the globe. Trading begins in Sydney, Australia, then shifts to Tokyo, Japan. Next, London, England takes over and then “passes the baton” to New York. As New York shuts down, Sydney is opening for business.
The Forex market was not intended for retail traders. The original intent was to provide a currency exchange between banks and large institutions. In fact, prior to the late 1990′s, only these “big boys” could participate in the foreign exchange currency market. An initial capital requirement of $10 to $50 million was required, and there were other obstacles preventing the average person from trading currencies.
Retail traders began invading the foreign currency market as the Internet expanded and Forex trading firms began offering retail trading accounts. With reduced capital requirements and online access, all that is needed to get started is a computer, a high-speed Internet connection, and an understanding of the Forex market and how to trade it profitably.
The Forex market comes with a series of additional benefit, which make it irresistible to traders. There are only seven major currency pairs. Compare that to tracking thousands of stocks. There are no commissions or exchange fees. Your broker simply makes their money from the difference on the bid / ask spread. This is also the most liquid market anywhere. There are other benefits, but you probably have an idea as to why currency trading is quickly growing in popularity with retail traders.
The obstacles to accessing these benefits have been largely eliminated, with a quality Forex trading course the only real barrier between you and Forex trading profitability.
Fortunately, the need for education is being addressed. The Forex Income Engine is one of the higher quality courses that not only reviews the basics of the Forex markets but provides a rigorously back-tested, yet simple system you can use to trade the currency markets on an intra-day basis with a minimum of capital. With good instruction, there is very little that stands between you and the ability to benefit from trading the foreign exchange currency market.
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