Stocks & Commodities V. 23:7 (52-56): Forex, Anyone? by Rudy Teseo
It may be easier than you think.
When I first read about foreign currency trading and foreign exchange (FX or forex for short), my first reaction was, “That’s not for me.” Perhaps that’s been your attitude. However, when I decided to install a program and do some paper-trading before committing any hard-earned dollars, I was amazed at how easily I slipped into the routine. That’s because there’s very little difference between what I’m doing now and what I’ve been doing for years.
NUTS AND BOLTS
FX is the largest financial market, trading $2.5–3 trillion per day. It is open 24 hours per day, except for a break from 4 pm ET Friday to 2 pm ET Sunday. With more than two dozen currency pairs to choose from, there is always action to suit your style. Executions are instantaneous, the pairs are very liquid, and the leverage in the two types of accounts is the highest found anywhere. For option traders, there are some
unique contracts available in FX with large gains possible. FX also provides one of the best trending markets, and trends lead to profitable trades. A final difference: you can short a currency pair without an uptick.
Foreign exchange is an exchange where one country’s
currency is exchanged for another’s through a “floating”
exchange rate system. There is no central exchange, like the New York Stock Exchange (NYSE). What you have is a network of banks running the exchange electronically.