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FOREX: Introduction to the Foreign Exchange Market |
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Are you researching the topic of Forex and the foreignexchange market for education? Or are you a trader who islooking for other markets to play around with? Well hopefully,we will give you an introduction to the Forex markets that willaccommodate both your needs and inform you of the basic conceptsand issues that intertwine with the world's currency exchangemarket. Foreign exchange markets are always in a constant stateof flux, and for the budding forex trader, it can be a ratherdaunting place to invest and trade your money, or for thestudent it is a rather confusing topic to master. We introduceyou into the world of the foreign exchange market.
The Australian foreign exchange market alone turns oversome $US81 billion daily. And that figure only represents afraction of the worldwide forex market. The foreign exchangerate can be defined as the agreed price of one currencyexpressed in terms of another currency. For example, the EUROand USD (EUR/USD) currency pair can be quoted as "1.2204". Thiswould mean one EURO can be exchanged for $1.2204 US dollars. Onthe other hand, the (mathematical) inverse relationship is thatone US dollar would fetch 0.8194 EURO. As you can see dealingwith the foreign exchange market can get confusing prettyquickly if not for some simple high school arithmetic: somefractions and ratios.
Most currencies that trade in the worldwide foreign exchangemarket are floated with the exception of some that have a fixedcurrency value. Mid 2005 had the Yuan supposedly floated but thevalue of the Ren Min Bi (RMB - the other name Chinese currencyis given besides Yuan) is still strictly controlled by theChinese government. Trading the foreign exchange market involvestaking advantage of the floating values of currencies worldwide.The currency floating system is where exchange rates are allowedto change in price in response to the primary market forces ofsupply and demand. There are many things that influence supplyand demand and the value of currencies - too many to describehere - but a lot of the indicators are tied to the health of thecountry's economy.
As these floating currencies fluctuate in the foreign exchangemarket fluctuate and change, traders take advantage of the pricedifferences across the currencies and buy and sell into and outof trades to make a profit. Again, with the EUR/USD currencypair: if the value of this figure goes up it can be said thatthe EURO has gone up in value against the USD. On the other handif the value falls, it can be conversely said that the USD hasgrown in strength while the EURO was weaker.
This brings us to the end of our short introduction to theforeign exchange markets. You may have picked up a few things(or not) about trading forex. We have covered the basic conceptsof how the foreign exchange rates work, we've touched on why thevalue goes up and down and about the floating exchange system.We talk about the intricacies about forex trading and moredetail into the technicalities of trading the markets at ourwebsite.
This article " FOREX:Introduction to the Foreign Exchange Market " can be found inour Foreign Exchange (FX) Markets category.
About the author:
George Polizogopoulos is a staff writer for MyShareTrading.com , an information hub for traders: forex, shares, derivatives,CFD's. MyShareTrading.com also provides free blogs for traderswho wish to share their market experiences.
You may republish this article for your e-zine or website thatthe article is not edited and all html links are kept intact.MyShareTrading.co
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