Monday, May 30, 2016

What is Forex Trading?

The term Forex should now be well known among trading beginners. But what exactly is meant by the term and what exactly is involved in Forex Trading?

In this article we will be considering the following aspects of the forex trading market:

1. The foreign exchange market is the largest financial market in the world
2. Here you can trade Forex: market participants in the overview
3. Forex trading is booming
4. Forex: for beginners, too?
5. Enter the Forex market with a demo trading account

The forex market is one of the largest and most liquid financial markets.
The currency exchange takes place directly between market participants.
The respective exchange rate is dependent on the supply and demand of a currency.
The trader can speculate both on falling and rising rates against the other currencies.
Through the use of leverages high trading volumes can be traded with a low capital investment.
Strong price fluctuations and the use of leverages involve high return opportunities, but also implies enormous risks of losses on the capital employed also.
Flexible trading hours and low stakes make the FX trading attractive for private investors.

1. The foreign exchange market is the largest financial market in the world

The foreign exchange market is also known as the currency market, Foreign Exchange Market or Forex and has a daily turnover of over 4 trillion US dollars making it the world's largest financial market.

Development of the average turnover per trading day on global foreign exchange market between 1995 2013 (in billion US dollars).

There is a global market, in which the currency trading takes place mainly directly between market participants (over-the-counter or OTC). In this barter trading partners lead according to currency trading definition with international currencies. A simple forex trading statement would describe the forex trading as the buying and selling of one country's currency against the currency of another country.

Currency or currencies are always traded in pairs such as euro against the pound sterling, US dollar against Japanese yen, US dollar against Euro, etc. The most traded currency pair is it to EUR / USD.

Pending is the foreign exchange supply and demand. When there is a high demand for a particular currency the price can also increase. This demand is determined by among other things  the economic and political situation of a country, the level of interest rates of a country or by tourism.

A Forex Trader achieves yields, provided that the price of one currency against the other currency behaves as he expected. If he expects, for example, that the rate of the euro appreciates against the dollar he will enter into a long position. A short trade will be used when he assumes that the euro against the US dollar is experiencing a price decline. So a trader can make a profit from both falling and rising price trends.

In forex trading, so-called leverage can be used for trading. This means that with a minimal capital investment, which is deposited as a guarantee in the corresponding forex broker, the trader can place positions with much higher sums. Whilst this can make a multiple of invested capital possible - it can also expose the trader to high losses. With a leverage of 1: 100 it is sufficient to store only one percent as margin. Up to 100 percent can be achieved so now gains but also losses.

The currency market is a highly liquid market. Here sums are implemented up to five trillion dollars daily. The strong volatility and leverage offer high return opportunities while not insignificant risk of losses that can exceed the capital outlay.

2. Here you can trade Forex: market participants in the overview

We will now take a look at the market participants in forex trading offers. What kinds of investors are involved in these huge trading volumes per day? The main players in the Forex market are certainly large banks, but also industrial companies, trading companies and private currency traders. A significant impact on the currency market practices comes from the central banks whose monetary policy can strongly influence the exchange rates between currencies.

On the forex market, market participants act directly and usually together. Market participants including banks, governments, business enterprises, insurance companies as well as private traders all contribute to high liquidity of the currency market.

Are there any special Forex trading hours, which are to be observed?

It was mentioned already, there are lots of forex trading for many traders also due to its flexibility in time. Unlike the trading hours of the stock market, which is usually open only until the evening, forex trading participants can trade virtually around the clock. From Sunday evening 22.00 until late Friday night at 23.00 forex trades can take place without interruption. This situation results in part from the global time differences and OTC decentralised trade, which is not related to opening times of stock exchanges and also due to electronic trading systems.

Since the forex trading takes place directly between all market participants, the currency exchange is carried out with virtually no temporal interruptions. While currency trading in Australia and New Zealand starts on Sunday evening, the forex market in the US has just closed. So the trading with foreign exchange continued across all time zones and ends on Friday evening 23.00.

3. Forex trading is booming

Securities trading exchanges never played a particularly important role in forex trading. Thus, most still existing exchange markets were also consequently abolished. Trading plays out nowadays almost exclusively electronically, so that the market is open and highly interesting to private traders.

Forex trading is booming. The figures from the Bank of England show impressive 17% growth in sales from October 2010 to October 2011 for the UK, the largest foreign exchange market in the world, is carried by more than 35 percent of global trade. The much acclaimed Triennial Central Bank Survey shows an increase of forex direct trade (spot FX) by incredible 67 percent between 2007 and 2010. Our ECN broker compared with an overview about the increasingly popular ECN broker.

A fixed trading place does not exist in forex Tarding. Rather currency exchange transactions are conducted over the electronic interbank market. Popular is the trading of currencies, among other reasons, because the principle is understood quickly. Flexibility is also a criterion for this boom. On the Forex market trading hours we go into one of our counselors, and in one of the other sections of this page. Even the currency trading often requires only a low minimum bet capital, for example in comparison with the trade of shares.

4. Forex for beginners, too?

Forex can be traded even by beginners. Nevertheless, they should apply a differentiated commercial strategy as experienced or newbie traders. It should be clearly stated on the site: Without some losses there are no profits. Application of this theory is a corporate foundation. The decisive factor is that the losses are factored in and limited in advance here. A good risk management strategy is essential in this case.

Most forex beginners "practice" with a demo account. Here you are trading with virtual money. Often what you accumulate in a virtual account can be converted to a real trading account instead. But be aware of the change from demo to real money trading. Suddenly you become exposed to real money losses. Be sure to keep losses in check, you should lay out from the beginning a suitable trading strategy. Recommended are here mainly strategies, however, try to keep your method as simple as possible and always with a high hit rate. The trader who understands his strategy intuitively, is able to optimise their trades in the long run. One acts according to the so-called trend following, you go long on a clear upward trend. In a clearly discernible downward trend, however opt for short.

Forex Trading Tips for Beginners

Compare brokers before making your choice
Low commissions are better in the long term than tempting deposit bonuses
Decide what your own loss limit is
Have patience
If possible open forex account without additional funding obligation
If possible account with guaranteed Stop Loss
Use demo account
Split capital
Start with low leverages
Always have a trading strategy

In order to have long term success with Forex trading, you should note these various fundamentals. It will be pay to be flexible, inter alia, to respond quickly to market changes as well as carry out strategies effectively.

Helpful Tools for trading

Demo account

With a demo account you can always take the first steps in Forex trading and learn a great deal. First market events can be analysed and thenprojections simulated.

Use risk management tools

The trades should definitely use a risk management tool. There are two variants: on the PC or browser-based programs. For optimal use, it is important that the stop-loss order will be precisely defined. Failing this, the commercial risk can be calculated incorrectly and can cause unexpected losses. One speaks in such a case of a margin call.

Strategy formulation

Some brokers offer analysis tools to test strategies. With them the desired strategies are automatically tested and optimized where necessary. Recurring thinking and trading errors can be eliminated.

Don't be too emotional

Traders tend sometimes to let their emotions gain the upper hand whilst trading. This is when ill-considered, wrong decisions are often made. Especially in Forex it is important put your emotions to the side.

Keep a diary

Keeping a trading diary is recommended for beginners and professionals alike. In it can be strategies, documented successes and failures for you to understand and study later on. In this way you can see which strategy worked and which failed.

5. Opening a test account in Forex trading - how it works

For beginners and newcomers in Forex trading, it is essential to start extensively with a foreign exchange demo trading account. This is not only to acquire knowledge of literature, webinars, seminars or tutorials, but practically to test the corresponding trading platforms,  and the reliability of the broker. For this last reason a test account should be selected with realistic rates, spreads, execution speeds and key majors - major currency pairs - provided.

Furthermore, it should be ensured that the demo account is provided free of charge. Some brokers make use of demo accounts after a minimum deposit is made. So before the forex trading can be tested with a test account, the deposit of a minimum amount is required, the user, however, again - can cash out - if not satisfied of the platform or the brokerage offer. Here, however Withdrawal fees may be required by the broker.

The test account running times sometimes differ considerably. Some put their demo account with an unlimited duration available, so that traders can also try out new trading strategies in parallel with a live account. However, other demo accounts are available only a few days up to one month for testing. Virtual trade sums range from a few hundred euros to 50,000 euros.

The forex practice account Plus500 allows virtual trading on Forex market with 20,000 euros and an unlimited term:

Virtual Trading on Forex market

A good forex practice account is for its users not only free, but also best available in unlimited amounts of. So traders can use the test platform without risk for testing new trading strategies even after trying the trading platform and the trading opportunities continue. With virtual credit of 500 Euro to 50,000 Euro beginners and professionals can practice in front of the live trading without incurring a financial loss risk. Some forex brokers offer a demo account only on condition of payment of a minimum amount.

6. Conclusion: Forex Trading for All

Forex trading provides lucrative opportunities but can also be risky. These days the forex market is equally accessible for both beginners and professionals. However, just beginners be sure to know what they are doing before trading for real. Practicing with a demo account is recommended so that you can get a feel for the market and the various leveragess. In order to find a suitable broker, traders should accurately compare and check the conditions. The provider that best matches with their own commercial purposes, should also be the broker of choice.


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  3. A short trade will be used when he assumes that the euro against the US dollar is experiencing a price decline. So a trader can make a profit from both falling and rising price trading works