What is FOREX?

Foreign exchange market or currency market or Forex or Fx market is the market where a nation's currency is exchanged for that of another.

A part of the market constitutes of those who simply exchange a foreign currency for their own use like multinational companies who need to pay for the expenses at their facilities in different nations. The other bigger part of the market constitutes of currency traders. The currency rates keep fluctuating constantly. The currency traders keep a watch on the fluctuations in currency rates. They try to earn through even small fluctuations in the exchange rates. It is comparable to ones who speculate on movements of stock prices.

The Forex market operates through a global network of banks, corporations and individuals trading one currency for another. Thus there is no single universal exchange for specific currency pair. It has no physical location. The absence of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.

FOREX FAQs

How to start Forex Trading?
To start Forex trading you need a trading account. You can register a rading account with a Forex broker, such as SMART-I. You can then use their Forex client program to buy and sell currencies.

Where is the Forex market located?
The Forex market has no physical location. It is considered as Over-the-Counter or Inter-bank as trades are done between two counterparts - seller and the buyer. Forex works truly as a 24-hour market. It is not connected to any specific country or government organization.

How does Forex Trading happen?
Forex is often traded in pairs, for example USD/Euro, USD/JPY, Euro/JPY, GBP/CHF, and CAD/USD. You get 'short' in one currency and you will get 'long' in the other one. Unlike conventional stocks market, Forex trading does not have a centralized trade market.

Everyday Forex trade begins when the financial centers in Sydney start their day, and moves around the globe to Tokyo, London, and then New York. Traders can always respond to the market regardless of the local time.

What is the difference between Forex and traditional stocks/mutual funds?
Currency Traders or Forex Traders speculate upon the short term movement in the currency exchange values. It is a day-trading activity where traders will buy and sell in the same day. Stocks and mutual funds trading are on a more long term basis where trades may last for years or even decades.

What are the working hours of Forex market?
Forex market is open from 22:00 GMT Sunday (opening of Australia trading session) till 22:00 GMT Friday (closing of USA trading session).

What is margin?
Margin is money you need to have in your broker account to secure your open position. If funds in your account fall below margin requirements, the system will close all open positions. This prevents your account from falling below your available equity, which is a key protection in this volatile, fast moving marketplace.

What are short and long positions?
positions are taken when a trader sells currency in anticipation of a downturn in price. Making this move allows the investor to benefit from a decline. Long positions are taken when a trader buys a currency at a low price in anticipation of selling it later for more. Making these moves allows the investor to benefit from changing market prices.

How much money do I need to start trading Forex?
With some Forex brokers you can start trading Forex with as little as $1. Usually, the minimum amount varies from $100 to $10,000.

Can I lose more than I invest in Forex?
No. The broker won't allow you to lose more than the available funds on your trading account. It will simply close your losing position when the resulting account balance becomes too close to zero. The loss that is bigger than the trader's deposit is a direct loss of the Forex broker. It's in the brokers' interest to prevent such losses. To secure themselves brokers implement a Stop-Out level (usually about 20%), which means that the most losing position will be closed once

Benefits

Advantages of Forex
Control investments efficiently with its Highest Liquidity
The forex market is never devoid of buyers and sellers. It is the largest financial market in the world. The prospect of quick liquidity attracts any investor as it allows the freedom to enter or exit the market at your will. An immediate response to trade tips and news is possible in Forex. There is no other market or investments that you can ever make an exit exactly at the time you wish to.

Trading round the clock – 24 Hour Trading
Being an interbank, over-the-counter (OTC) market, Forex operates 24 hours per day throughout the week. If the European session is ended the Asian session or US session will start, so all world currencies can be continually in trade.

High Leverage – High Profits
Leverage is a loan that is provided to an investor by the broker that is handling his or her forex account. In Forex trading, a small margin deposit can control a much larger total contract value. Typically the amount of leverage provided is either 50:1, 100:1 or 200:1. In a 200:1 leverage a $500 margin deposit can enable traders to buy or sell $100,000 worth of currencies. t gives Forex traders the ability to make extraordinary profit.

Very low Commission charges and fees
Active traders benefit the most from forex because Trading Forex has much lower transaction costs than other investment products.