Introduction to Forex

The forex market has expanded considerably into the retail sector in recent years with the advent of online forex trading, forex signal software and forex trading systems. These opportunities, which were once only accessible to banks, financial institutions and professional currency traders, are now available to just about anyone with an Internet connection.

Furthermore, such services are now offered for a fraction of what they would have cost just a few years ago. Also, a number of educational websites offer useful learning material for the beginner on the topic of forex trading.

What is the Forex Market?

Foreign exchange, or forex for short, basically just involves the exchanging of currencies. After the regime of fixed exchange rates broke down in the early 1970’s, forex trading has boomed along with the growth in international commerce to become the largest financial market in the world today by far. Total forex transaction volume averages in the trillions of dollars every business day. The largest forex market participants range from international banks and corporations to hedge fund managers and central banks.

Currency Pairs and Exchange Rates

In essence, foreign exchange refers to a financial transaction involving exchanging the currency of one country for the currency of another, at a particular rate of exchange. Currencies are usually denoted by their three-letter ISO 4217 code and forex quotations will be for a particular currency pair, such as EUR/USD or USD/JPY.

The first currency in the pair is the primary or base currency, while the secondary currency is usually termed the counter-currency. The exchange rate for most currency pairs fluctuates according to economic conditions in the countries issuing the currency pair involved. Such factors might include:

Interest rates Governmental stability Central Bank monetary policy Economic prospects Supply and demand Trade balance Currency reserves Credit status Fiscal policies

Forex Trading Systems

Many people have traded the forex market without finding success, and most of them have eventually stopped trading because they either did not have a good system or were unable to maintain discipline when trading it. The fact remains that having a sound trading plan underlies success as a trader.

Furthermore, while many fundamental factors can affect the exchange rate of a country’s currency versus that of another, they often get priced into the rate by professional market-makers before smaller traders get a chance to hear about them. As a result, many retail forex traders prefer to rely instead on technical data based on price and volume behavior over time to make their trading decisions.

Also, a large percentage of professional traders use technical analysis to develop their trading systems so they can profit consistently from trading forex. Just about all of the automated trading software currently available for the retail forex market bases their trading decisions on technical rather than fundamental factors.

Thanks to the Internet, not only can you now open an account and trade forex, you can also get a complete forex education online. In addition, many automated forex trading systems are now available for sale online, and a trader can also readily find forex signal software and signal software subscription services to enhance their trading.