The Forex market is a currency market available world wide 24 hours a day. The Forex is a foreign exchange that allows traders to buy or sell one currency against another. Currency trading is the most liquid and highest volume type of trading available. Each and every day trillions of dollars are exchanged on the Forex.
The Foreign Exchange Market is an informal network of trading relationships between the world’s major banks and other market participants. It is sometimes referred to as the ‘interbank’ market. The foreign exchange market has no central clearinghouse or exchange, and is considered an over-the-counter (OTC) market.
Transactions are made at the current market rate and are for settlement within two business days. An exeception is the USD/CAD which is only one day. Spot transactions are automatically rolled over by your dealer. This allows you to hold a position for as long as you want. Interest charges may apply to such rolling over.
When you hold an open position past 22:00 GMT (5PM EST) your position is subject to daily interest charges. The amount of interest is calculated by taking the difference between the two currencies interest rates. If you are holding a currency with a higher rate of interest, you will earn interest. Conversely, if you are holding a currency with a lower rate of interest, you will pay interest.
In order to compare the value of one currency against another, the exchange rate is used. If if EUR/USD is quoted as 1.2900, 1 Euro is then worth US$1.2900. The currencies are joined as a pair in the exchange rate. When one currency is bought, the other is sold. In this example, the Euro is called the Base Currency and the US Dollar is called the Counter Currency.
To trade one minute strategy in the Forex, you will need the services of a market maker. This is a dealer willing to make a market with a currency pair. They provide liquidity and quotes on both sides. A broker is a firm that matches up buyers and sellers for a fee or commission. Both brokers and market makers are required in order for you to be able to trade the Forex.
When you place a trade you will use the bid and ask price to make your decisions. The spread is the difference between the buy and the sell quote for a given currency. The spread is quoted as a term called a pip which means Price Increase Point. If a given currency has a quote with a spread of 3 pips, you would need the currency to move 3 pips in your direction for you to break even.
When trading the Forex, you can choose to use the full Forex or the mini Forex. On the full market, a pip is equivalent to $10 and on the mini, it is $1. Transactions are carried out on lots of the currency. A lot is equal to 100,000 units of the base currency on the full Forex and 10,000 units in the mini.
If you do the math, one lot is equal to a lot of currency. The Forex allows traders to leverage their positions with margin. In fact, the largest margins possible in trading are to be found in the Forex. In the full market, the leverage is 1% which means you could open a $100,000 position with a deposit of $1000.
Some common currencies used today include:
USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar
AUD = Australian Dollar
NZD = New Zealand Dollar
There are numerous online Forex brokers. If you are considering trading the Forex, remember, to test their service before committing. Most brokers will give you a demo account that you can trade with as you test their platform. Remember, all trading involves risk. It is your responsibility to trade diligently and within your limits. To minimize the risk, you should seek professional education, especially if you want to make Forex trading a long time strategy for making money.
A great Forex trading system for you to consider is offered by Andreas Kirchberger. His software system generates all the buy/sell signals for you automatically. All you have to do is pull the trigger, and relax. The best part (in my opinion) is that there is only one small one time fee and you are not tied to any complex trading patterns or charts. There are some nice video’s too that you can watch on the site above to get you started.