Discover What Forex Trading Online Can Mean To You

Forex is short for the foreign exchange market, which is exactly what is sounds like, that is, trading one type of currency for another. For the novice trader, there are Websites that offer tutorials and videos. You can even open a practice account, so you can get familiar with the process before actually putting any money on the line. forex trading online is an education in economics, and you might even make a profit.

There are no open market places for currencies, so they simply trade over the counter. The foreign exchange market opens on Monday at 7:00 am in Australia and closes at 5:00 pm in New York. Traders can make forex trades 5 days a week, 24 hours a day. It is all very fast paced, which may be the reason some people are somewhat intimidated by the process.

The object of forex trading is to make a profit by selling one currency and buying another. Traders want to capitalize on the constant fluctuations in the value of currencies. The entire process with all the changes happens at a fast pace. Currencies are always traded in pairs, with one type of currency being bought and the other being sold simultaneously. The forex pairs that are most frequently traded are called the majors.

The seven majors account for the majority, hence the name, of trading in the foreign exchange market. The U. S. dollar happens to be the currency which other currencies are measured against. For example, one U. S. Dollar may be able to buy 1.4558 of another forex currency. This is a concept that hits U. S. Travelers hard when the value of the Dollar is down, and can be a nice surprise when the value is up for the Dollar.

You can also trade currencies other than the majors. These types of forex trades are called cross currencies pairs. If you want to venture into the cross currencies, it is a good idea to start with the most popular pairs. These pairs will have the most information available, in terms of research and news, to help you make your choices.

As the currencies are sold in pairs, the first currency listed is the base currency and the other is the counter currency. The base currency is the one being sold. It is important to remember that the value of the base is always 1. There is the buying price and the asking price. The selling price is called the forex bid price, and the buying price is called the ask price. Just remember, sell translates as bid and buy translates as ask.

There are new terms that novice forex traders need to learn, such as pip and spread. The spread is the difference between the bid and the ask price. If the spread is wide, the currency is not that liquid. This means you may have difficulty selling it. The more narrow the spread the more liquid the currency.

The smallest amount by which a quote can change is called a pip, which is usually the fourth number to the right of the decimal. One exception is the Japanese Yen, where the pip is the second number to the right of the decimal. As the pips rise and fall you can either make a profit or lose money. Forex trading online is all about speculating, so it is a good idea not to invest more than you can afford to lose. Opening a practice account is the best way to start your online trading. Forex traders do better when they understand the process.

There will also be small fluctuations within each day or hour when prices seem to bounce within certain boundaries. Do not be tempted to try to make a huge amount of money by using maximum leverage on a small account. best forex signal service Interbank currency trading is a term that you might see many times on forex websites and forums.