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Forex 101

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What is forex? Well simply put its trading between different types of currency based upon its value. It’s likely you’ve engaged in this exchange if you traveled abroad and visited a country using a type currency other than your own. If you take a trip from the US to France you’ll have to convert your amount in dollars to euros. Based on the value of the two currency which is determined by supply and demand dictates how many euros you will receive for your US dollars. Due to the changing supply and demand of each country’s currency the exchange rates always are changing.

The forex market is also know as currency trading and is a decentralized market which spans globally. Currency trading is known to be one of the most liquid and largest market in the world. The average daily trading volume surpasses 5 trillion. With an immense market, high liquidity and a decentralized market place. Each of these attributes give the forex trader an advantage to the stock day trader.

First off is the high liquidity of forex in general. This is a huge advantage to forex traders who like to operate on smaller trades over the course of maximum of a few days. However some currency conversions are more liquid than others. the most liquid based on how in demand and quickly the asset can be sold for was the US dollar and euro conversion. This is based on how quickly these currency pairs are sold and bought and how close they are to the market value. The EUR/USD makes up 20 percent of the total percentage of transactions that take place. Liquid pairs can be characterized by the fast execution of orders, rare slippage and lower spread. This is why the EUR/USD is a preferred trading pair. Some even get attached to the EUR/USD and wont even consider any other pair. Don’t limit yourself to one pair since there are many other pairs that have great lower spread.

The decentralized market place is a very attractive feature that the stock markets do not have. A decentralized market means there is no one market that is under set hours based on time zones. The forex market does not operate like the stock market does. the stock market is closed on weekends and holidays and the hours do no run 24/7. For the forex market it runs non stop 365 days a year. the reason for this is because the market is based upon different country’s currency value. Meaning when the Australia market closes you can trade your EUR/USD in Asia or Europe or the US. This feature gives the trader an advantage since he can be on top of his or her trades and make the best transaction he or she may be able to get.

Interested parties can trade on the Forex via different brokers such as Bronze Markets. Forex as a whole is massive. as stated earlier the market contains over 5 trillion in trading volume transactions each and every day. Every stock market combined cannot even come close to this staggering amount. The volume of trading is due to the high level of liquidity that the forex market has. Being able to make quick transactions and get good margins will only encourage traders to make more transactions. Thus the trading volume is very high and there is always room for more traders to get their piece of the EUR/USD or any other liquid pair.

The forex market has a few main feature that the stock markets do not have. The high liquidity of the market in general and more specifically the pairs make for quicker transactions. The global market place and decentralized market allows for non-stop trading opportunity. And the sheer size of the market is an encouraging sign to get in there and start trading forex.