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Forex Tutorial - Introduction to forex.

Forex is far and away the world's largest and most liquid trading market. With a daily estimated turnover of 2-3 TRILLION DOLLARS the daily volume of forex trading is at least 30 times larger than the New York Stock Exchange. Many forex traders consider it to be the best home-based business venture for the average person.

forex tutorial graphFX Trading is not bound to any one trading floor and is not centralized on an exchange, as with the stock and futures markets. The FX market is considered an Over-the-Counter (OTC) or 'Interbank' market, due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period.

One of the things that people love about the forex market is that, unlike the stock market where it can be almost impossible to pick a winning stock in a continually fluctuating market, forex traders can make a tidy profit whether a currency (or economy) is going up or down.

This one feature makes forex trading the perfect "recession proof" financial venture, because it is just as easy to make money in forex during a recession as in an economic boom. This is because when one currency goes down in value, it's currency "pair" is going up in value - meaning that someone is always making money.

Unlike the stock market which can "create" (or evaporate) wealth, the forex market is a "zero-sum" market. Zero-sum refers to a situation where the amount of "winnable goods" (or resources in our terminology) is fixed. Whatever is gained by one participant, is therefore lost by the other participant: the sum of gained (positive) and lost (negative) is zero. This corresponds to a situation of pure competition.

The great thing about the forex market is that unlike the stock market, there is no "theoretical" or "pretend" wealth created. If someone earns $10,000 in forex, it's because someone else lost $10,000. What this also means is that if you have $50,000 in your forex portfolio, it will always be there, it can't just evaporate overnight in value the way a stock or mutual fund can.


Forex markets - who's trading and why.

There are many, many reasons why forex (FX) is such a huge and active market. Countries need to buy foreign currencies to invest in a country or to buy their goods. Every day more and more investors are turning to the all-electronic world of forex trading for income and profit because of its numerous benefits & advantages over traditional trading vehicles, like stocks, bonds and commodities.

Many people mistake FX as trading the futures market, where you buy a contract to purchase a particular currency at a future price in time. What forex traders do is much less risky than trading currencies on the futures market, much more profitable, and a lot easier, than trading stocks.

Most forex traders are engaging in the "spot" forex market which means that when a currency is bought, the position is closed in a specified amount of time, usually 48 hours later. forex zero sum picture

However, it is important to note that most participants in the futures markets are speculators who usually close out their positions before the date of settlement and, therefore, most contracts do not tend to last until the date of delivery.

The forex market plays a vital role in the world economy and there will always be a tremendous need for foreign currency exchange. International trade increases as technology and communication increases. As long as there is international trade, there will be a forex market. The FX market has to exist so a country like Japan can sell products in the United States and be able to receive Japanese Yen in exchange for the US Dollar.

There's plenty of money to be made in forex for traders that use the right trading techniques and tactics - and the amount of money on the table is always going up. And, with only 5% of the daily turnover of volume coming from banks, government, and large corporations who need to hedge, the other 95% of forex is for speculation and profit!

It's important to note that forex is nothing like the "day trading" which was so popular a few years ago. Back then everyone and their dog was day trading - buying and selling stocks for the short term in order to turn quick profits. Of course, this was also happening at a time of almost continual (and unrealistic) growth in real estate and the stock market - many people did make some money at the time, but it was quite short lived as the stock market and real estate market were not based on realistic economic fundaments - and have since crashed.

As we've since seen, the stock market is a fickle thing, and many people have come to see that the stock market takes away wealth as easily and quickly as it creates it. The forex market is completely different, as it doesn't operate on a "boom or bust" cycle like the stock market does. The FX market is extremely liquid as it is essentially dealing in cash, and so the value of the forex market is real, not 'theoretical' like the stock market.

In the stock market, a company's shares can triple overnight, or become worthless just as fast. In forex trading, you are making money because you are essentially betting on a currency to increase or decrease in value. If you're right and someone else is wrong, you make money and they lose money. If they're right and you're wrong, you lose and they win. Forex really is that simple. The best way to get good at trading is to practice using a free demo account and learn the ropes without risking any money. Below are 3 excellent sites for you to try. Good luck!



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