A Brief Introduction to forex Trading

Forex trading or FX trading is foreign currency trading (which the value is difference time to time). Forex is investment product which have liquid characteristic and international. The difference values between two foreign currencies become profit base.

As a trading item, forex known years ago since converted technique between two currencies founded. But, as an organization, forex trading exists after there is futures arbritage agency. For example, IMM (International Money Market held in 1972, a division of CME (Chicago mercantile Exchange), LIFFE (London International Financial Futures Exchange), TIFFE (Tokyo International Financial Futures Exchange), and etc.

Money turnover in forex market can reach USD 1,800 billion a day (bank of International Settlement survey in April 2004). That amount is 40 times bigger than commodities and stock market turnover in every market in leader countries. So, with huge trading volume, this market is so liquid, and there are no market controllers who have huge capital. Currency movement only depend on market, there is no player who can control it.

The currency which usually traded are US dollar (USD), Japan Yen (JPY), Franc Swiss (CHF), England Poundsterling (GBP), Australian dollar (AUD), and Euro (EUR). All that currencies traded in pair, such as EUR/GBP. GBP/USD, etc.

What the difference forex trading with money changer? The main difference are forex trading do not happen in physically trade, and forex can traded in margin system.

Margin system make us spend little fund, so we can still make an invest although we are not rich man. As an example, if we want buy USD 100,000, with margin system trading, we only spend 1% of our fund as a guarantee. But our profit value from USD appreciation is same as if we spend our USD 100,000 from our pocket. Because online forex trading does not involve trading in physically way (an investor do not hold the money, but only transaction evidence), so the guarantee margin can be so small.


Previous years ago, forex trading use telephone as transaction media communication (dealing quotes). But right now, you can trade use internet. You can see price in real time on your computer screen. You can invest your money in less second, so miss communication between you and your broker company eliminated. Beside that, in online forex trading, there are a lot of facilities, including forex analysis.



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