In essence, this market represents the transfer of money between currencies. When you exchange one currency for another (e.g. change your Rands into Euros) this activity is a part of the forex market. There are over 50 major currencies in the world and each one fluctuates in price against every other one at any given moment.
Forex trading takes place over the counter (OTC) and banks throughout the world participate. The main trading centres are London, New York, Tokyo, Hong Kong and Singapore – which means that these are the financial capitals of the world where the greatest value in foreign exchange transactions takes place. Individual investors may trade in forex at any licensed intermediary, such as banks, bureaux de change or brokerages. Forex futures and derivatives are traded via the futures and derivatives markets.
Trading in forex is necessary to support the process of international trade. For example, it enables South African businesses to import European goods and pay in Euros, even though the business's income is in ZAR. But the opportunity to profit from trading in forex also makes it a favoured trading instrument for a wide range of traders, such as banks and other financial institutions, governments, corporations and individual investors. Forex is an ideal instrument for futures trading and options trading, which makes it a good instrument for hedging or speculation.
When reading currency quotes, you have probably noticed that there is only a single quote for a pair of currencies. Currency pairs are quoted as such because a currency is only valuable in relation to another currency. The value of a domestic good in an open market is very easy to determine - just look at the current market price. In this instance, the value of the good is essentially being compared to the currency. Therefore, when quoting the value of a currency, it must also be valued against something else.
Independence: Online trading is great for individual investors who wish to do without the intervention of a broker. The platform in effect fulfils the function of a broker. However, although you can execute your own trades, in reality they are channelled via the trading firm's trade desk.
Thanks to modern Internet transmission speeds, online transactions can all be done in a matter of seconds – much quicker than picking up the phone and making a call.
Convenience: Online trading gives you the tools for trading literally at your fingertips and on your PC desktop. Mobile phone technology now also makes it possible to carry your trading platform with you in your pocket.
Spread Trading provides an opportunity to profit from an increase or decrease in share prices as quoted on the world's stock markets. Other financial instruments, such as currencies or commodities, may also be traded. It is not necessary to actually buy the shares or other instrument.
To answer this question, it is best to use an example, such as a Spread Trade on the price of a share. You research the share price of a company that you are interested in, e.g. ABSA Bank. You will form an opinion t that the share price will either increase or decrease in the future. If you think the price will go up you "buy" the share price. If you think the price will go down you "sell" the share price. If your opinion is correct, you will make a profit, but if your opinion is incorrect, you will make a loss
It differs in many ways and in each case it has major advantages over investing in shares. Here are some of the main advantages:
• You can profit from falling share prices as well as rising prices
• You can open an account in minutes
• You pay no commissions on your trades
• There is no stamp duty
• All trades are executed immediately
• You can limit the extent of any losses
• You can protect or hedge an existing investment with a spread trade
• It requires a much smaller outlay (typically 10-15%) to make the same profit as would be derived from investing in shares
• There is no currency risk when trading in overseas instruments denominated in other currencies
• In addition to shares, you can trade
indices, currencies, and commodities
• You can do all your trading online or by phone.
Like any investment, losses may be incurred. However, you can take action to minimize these losses.
When recording your trade with your broker, you can state the maximum you are prepared to lose. This is called a "Stop Loss" and your position is automatically cut when you reach the loss limits you have specified. In addition, a loss-making trade can be terminated at any time, thus limiting any potential losses. You can stop the extent of the loss immediately by a phone call or by placing a 'counter' trade online. This is called "closing your position" and it is instantaneous, no waiting to contact a broker or hoping to find a buyer for your shares.
Understanding trading does more than just give you control over some or all of your own trades or investments. A proper trading education like the courses offered by Forex College gives you the tools to choose funds and fund managers with more confidence.
You will find through the learning process that you are the best trade and the best person to put in charge of your money.
Forex College Course will not only give you the tools to trades some of your own money as you see fit, but gives you the foundation to evaluate other investments and more importantly, other money managers.
The key to succeeding in trading is to lose well. It doesn't matter if you are a die hard fundamentalist who thinks that chart reading is akin to astrology or an unrepentant technician who thinks that all news flow has less value than celebrity gossip. Every great trader I ever met knew how to control risk which is simply a polite way of saying that they knew how to take losses.
Fundamental analysis is a way of looking at the market through economic, social and political forces that affect supply and demand. In other words, you look at whose economy is doing well, and whose economy is not doing well at all. The idea behind this type of analysis is that if a country's economy is doing well, their currency will also be doing well. This is because the better a country's economy, the more trust other countries have in that currency.
Technical analysis is the study of price movement. In one word, technical analysis = charts. The idea is that a person can look at historical price movements, and based on the price action, can determine at some level where the price will go. By looking at charts, you can identify trends and patterns which can help you find good trading opportunities.
Trading any financial instrument carries a significant level of risk to the capital you invest. Therefore, you should only trade money that you can afford to lose. The trading of these products may not be suitable for all investors or traders. You must ensure that you fully understand the risk involved and seek independent advice if necessary. All responsible care has been taken to ensure that the information included in this website is accurate and complete and all opinions expressed provide no guarantee of profits for any investor or trader in Forex College. Forex College will accept no liability for any loss which directly or indirectly may arise from this information. None of the information provided constitutes investment or trading advice.