Understanding the FOREX Currency Market: A Beginner's Guide

The FOREX currency market represents a huge opportunity for investors today. Although it is relatively unknown to the general public, it is well-known as a potentially great way to invest in investment circles. While you may have heard mention of the foreign exchange market, you may not be familiar with it or understand what it is. Here are the basics of the FOREX currency market and how it can benefit you.

The FOREX Market

The thing that strikes most people initially with the FOREX market is its size. The size of this market is unrivaled by any other market in the world. It boasts a daily volume of over $2 trillion, which is much larger than any stock exchange or commodities market. A lot of money is going through the FOREX market every single day. This gives investors a fantastic opportunity to claim a piece of it, if they know what they are doing. 

The market is open 24 hours per day, 5 days per week. It is not open on Saturday and Sunday, but any other time, you can trade FOREX. The reason behind this is that there is no central exchange like there is with other markets. The market is held online through FOREX brokers and financial institutions. Therefore, you can trade it from the comfort of your own home or anywhere you want to be. 

Leverage

One thing that makes this market different from all the others is leverage. While the concept of leverage is common in other markets, it is not done to this level anywhere else. In the stock market, the most leverage you will be able to get is 2:1. With futures, you might be able to find 15:1. In the FOREX market, 100:1 leverage is the norm. There are even brokers out there that allow 500:1 leverage. 

This extreme leverage creates the possibility of huge profit potential. If you consistently win in this market, you can make some serious money. The FOREX market only moves about 1% of the price of the currency pair in a given day. Therefore, there are only very subtle price movements that take place. With the use of leverage, these price movements are amplified in your account. You can win big off of little movements and you can lose big as well. 

Systems

The FOREX world also offers an abundance of trading systems. There are signal services that will send you a text or an email when it is time to place a trade. There are software programs that plug into your trading platform and handle everything for you. There are even managed accounts that allow expert traders to trade your assets for you. The options with FOREX truly are limitless. There are hundreds of different trading strategies and ways to make money. Before you choose a strategy, you will want to make sure that you do your research. Some strategies may not actually be profitable. However, in FOREX, you can actually trade these strategies in a demo account before you risk any money.