About Forex Trading

About Forex Trading

by Ivan Tan

Forex trading is also known as foreign currency trading and is known to many as FX market. The market has only one commodity for sale and for purchase. Currency is sold and purchased in this virtual market. The FX market is thus the only market in the globe that sells and purchases the same thing. The forex market is thought to be undertaking more than 2.8 trillion dollars' transactions per day. This is much greater than the value of the total equity share transactions in the US in fact it is about thirty times more than the equity market.

The main traders of the currency are the central banks, the numerous commercial banks, other traders, private investors etc. The major share of the transactions related to forex trade is attributed to the commercial banks and the central banks. This trade sustains on the fact that the value of a currency does not remain stable. The value of a currency if increases can be sold out to buy other less valuable currencies and this activity in turn is profitable. The value of a countries' dollar stock is thought to be its strength. The country's central bank sells dollar when the value of dollar decreases; and in turn buy its own currency thus there is a margin of gain. This means that the value of the country's currency has risen; this is a positive for the country.

The fluctuation in the value of any currency is attributed to the socio economic factors related to the country. This means that when any significant change in the political climate can lead to the change in the value of the currency.

The forex trade is indeed unique in its own rights. The dealers display two boards in front of their desk these will be the bid price and the ask price. The bid price is the price for selling the base currency. The ask price is the price for which the base currency is sold.

While purchasing a currency the buyer has to pay an amount more than its original price. This increase in the price is thought to be the equivalent to the commission. No commission fee is charged for trading in the forex market. This is the hidden fee to the dealer or more correctly this is the profit of the dealer.

When taking the loss to gain ratio it is almost equivalent to 7:3. It is thus a highly risky affair. Majority of the moneymakers are the shrewd traders who operate from their houses. The majority of the looser category is the traders who are not bothered about the basics of the forex trading and who are the ones who are incapable of controlling their emotions.

The majority of the traders who gain money are those who are the ones who make accurate calculations and the ones who are more vigilant to the day-to-day happenings. The professional approach is the key to success of any forex trader. The majority of the winners are the ones who crave for perfection in their deals and the ones who are tireless at their work.