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Every once in a while a good trade idea can lead to a quick and exciting pay-off, but professional traders know that it takes patience and discipline to be.
Forex is a commonly used abbreviation for "foreign exchange". It is typically used to describe trading in the foreign exchange market, especially by investors and speculators.“You may not know it, but forex is actually one of the largest markets in the world, with over $4 trillion in average daily volume transacted. This easily dwarfs the stock market. All the world's stock markets combined average only about $84 billion per day.”
So, if forex is so big, why have so few people heard of it?
The simple answer is you have probably used the forex market before, either directly or indirectly. Any time you take a trip to another country and exchange money, you just made a forex trade.
Whenever you buy something in a shop that was made in another country, you just made a forex trade. You paid in your own currency and the manufacturer was paid in a different currency.
People trade currencies all the time, but how can currency be an investment? Here's a simple example. Imagine that you took a trip from the United States to Europe in 2002. For the trip, you changed your US dollars into euros. At the end of a trip, you typically would change any extra euros back into US dollars. But what if you didn’t?
In 2002, one euro was worth about 90 US cents ($0.90). Say that you decided to hold on to 500 euros, and left them sitting in your desk drawer for 5 years. In 2007, you took your euros to the bank and sold them for a 2007 price of $1.40. Since you bought the euros for $0.90 and sold them for $1.40, you made a $0.50 profit per euro. You would have made $250 just because you held on to those euros and had bought and sold at the right time. That’s a 55% return in 5 years.
The $4 trillion forex market mostly runs on the same idea. Many of the world's giant banks, hedge funds, and insurance companies actively trade currencies as a way to make money. Since they do so in very large amounts, they record profits and losses in the millions every day for the smallest fraction-of-a-cent movements in exchange rates.
Many have not heard of the forex market because the market has historically been largely exclusive to industry professionals. The average person could buy a stock but couldn’t trade currencies. So it remained solely in the hands of the big boys.
Like the online stock trading revolution of the 1990s, the Internet has brought forex trading within reach of the average person sitting at home.
Thousands of individual traders around the world can now trade currencies from their living rooms, with nothing but a computer, an Internet connection, and a small trading account.
You can now make trading and investment decisions to buy and sell British pounds or Japanese yen at any time, day or night (Sunday through Friday). This brief guide will show you how. But first, it's important to know why you should trade forex.
Online forex trading has become very popular in the past decade because it offers traders several advantages.