What is Forex

Forex (also known as FX, FOReignEXchange) is an international (interbank) financial market for trading currencies. It is world (international) market and so it works round-the-clock (from Monday to Friday). That makes it more attractive in comparison to certain (national) foreign exchange markets, where trading is carried on only within working day. In addition Forex is a leader of total volume of daily transactions among financial markets. Today its daily turnover is more than $4 bln, analytics predict $10 bln increase by the year 2020.

Such a huge volume (Forex market volume in daytime exceeds approximately twice the USA annual budget and fourfold - the annual budget of Great Britain) is a guarantee of high liquidity of the market. Liquidity is a currency ability to be changed practically without any difficulties with other currency.

There are lots of professionals who work with Forex (banks, trusts, funds, transnational corporations, broker companies). Broker companies act as intermediary between the currency market and individual traders, enabling investors with different financial abilities to carry out operations at Forex and to earn (due to significant leverage) significant means.

Not aiming to give full detailed history of financial markets, we will mark some of the most important dates of its development.

The currency market has a great history that starts in the Ancient Middle East. In the Middle Ages the appearance of international banks rises the necessity of means of payment that could be valid when offered to third parties. This period is marked with increase in number of transactions, their variety and flexibility.

By the end of XIX century the currency market takes more or less developed forms. In 1867 in Paris it was registered as legislative structure. There were no fluctuation of currency at that period as all the currencies were tied to the gold. This period is called The Epoch of Gold Standard.

The next important date is 1944 when in the Bretton Woods (USA) the Bretton Woods Agreements were signed. According to them all the world currencies were tied to USD, and the latter - to the gold. The agreements established the International Monetary Fund (IMF). The rate changes were strictly regulated within 1%.

In 1971 USA gave up on free convertibility of dollar to the gold, and as a result of the agreement signed in Washington (USA) - the Smithsonian agreement, the fluctuations to 4,5% against dollar and to 9% against non-dollar pairs became possible. In fact it brought the Bretton Woods system to the end.

In 1976 IMF proposed to confirm legislatively the relationships between currency market participants in the form of a new agreement which was signed in Kingston (Jamaica) by the leaders of 20 largest economic countries, except those in communist block. As the result of this (Jamaican agreement), USD became international reserve currency with function of universal mean of payment and the evaluation of currencies of other countries. This agreement also officially opened the possibility to free-floating rates, although some countries ignored the established in 1971 restrictions on currency fluctuation.

Probably, it is the moment of beginning of the Forex market in its actual form. With time and development of telecommunication technologies, the trading in the building of stock exchange gave way to phone dealing and then to electronic dealing systems. Today practically all the transactions take place via Internet.

Advantages of Forex

As it was already mentioned, due to high liquidity Forex allows to change without any difficulties practically all volumes of one currency to another. Moreover, high liquidity means that a transaction might be closed practically immediately. It is achieved due to two reasons. Firstly, the trading is carried out via electronic means, secondly, every moment the market is full with big number of buyers and sellers that in accordance create the highest demand and equitable supply. However liquidity and volumes are not the only advantages of Forex.

Working with Forex you have a possibility to choose when and how long you are going to work and when and how long you are going to have a rest, fun, to study or communicate with friends and relatives etc. Your profit depends only on you. It does not depend on your boss or your stuff, your business partners, supplies, terms, goods or services. There is seasonality at Forex but it does not influence your profit. You can choose the appropriate profitable tactics for every time period. You do not spend money on advertisement of your goods or services, you do not look for buyers, you are not obliged to certificate or license your production, and all this brings your overhead and commercial expenses to naught.

You will need a PC or a mobile device (laptop, tablet PC) with the net access for your work. This is all. LiteForex will supply you with special software for free. You can work in your apartment, dealing-room, Internet-cafe, to put it simply, in any place with Internet access. With the help of Internet data card you can choose a comfortable place for your work in any place of the world.

Apart from these there is one more advantage of Forex. Having fix profit on a percentage base (for example, 30% per month) your profit in absolute term will grow with the increase of your capital. Mathematicians proved that having a positive (no matter how small it is) mathematical expectancy of trade strategy, with the help of means of money management it is possible to provide anexponential growth of deposit.

The difference between line and exponential profit

In case of using the advisors in trade (EA), this type of profit may be regarded as passive profit. It means that once you create the conditions for gaining the profit, you just get it regardless of your work.

The Significance of the Foreign Exchange Reserves

Even if you are a newbie you have probably heard about the so called Foreign exchange market reserves. We will try to explain in the following article all the significant features of such Forex reserves and their impact on the global Forex trading system in general. So read further in order to find out more about these mysterious Forex reserves.

In fact there is nothing mysterious in the definition or functions of such Foreign exchange market reserves because they simply refer to the various foreign exchange notes and governmental debts which are held by the hugest world’s central bank organizations. Most of the world’s countries have their own Forex exchange market reserves which are used when it is necessary. By means of such reserves a country can impact on the exchange rates and on the import-export economy as well.

Speaking about more precise identification of the Foreign exchange market reserves, we should say the following: government representatives use such reserves in order to provide a proper amount of different international payments. The functions of such payments can be very different but mostly concern procuring of various services and products like raw materials, real estate objects and equipment for military forces. High reserves mean a country is rather powerful from the economical and financial point of view. As you may understand, every nation and government is very motivated to develop a strong and high Forex exchange market reserve. Having such a strong back-up a country can provide negotiations concerning reducing interest rates on a country’s debt and close the contracts with huge international partners on much better terms.

You may ask – what central bank organizations can get from such Forex exchange market reserves? And we answer – the officials get a chance to control exchange rates on their own domestic currency rates using reserves as strong financial back-ups and political tools. In order to make a domestic currency more stable and stronger a nation can spend a Foreign exchange reserve to purchase its own domestic banknotes. For sure, such activity will increase the demand for this currency which will lead to higher valuation rates. Or a country can use such a strong reserve to buy foreign banknotes in order to reduce the value of its domestic currency. Everything depends on the chosen strategy a country follows.

To make it easier for you - those nations which can boast stronger export economies are aimed at reducing the exchange rates making them weaker. In such way exported products become more affordable for foreign customers. Besides, a weak home currency can attract a buying interest for the security investments of a nation which become very cheap for foreign customers as well. So in order to attract more foreign potential customers and investors a nation with a strong foreign exchange market reserve can weaken a domestic currency on purpose.

As for the low exchange rates they set for home currency they can become inflationary due to the fact imports turn to be more expensive at home. If such situation occurs a central bank of this nation uses a FX exchange reserve to purchase a home currency and support in such way higher exchange rates under the circumstances when inflation turns into a concern.

Forex Information Useful For Every Beginner

The most common information and the initial knowledge along with understanding Forex trading can assist you a lot if you do your first steps in this direction. Surely, any article or issue even the most detailed one can’t give all necessary Forex information a beginner should know before starting a trade but the most basic data you can learn from reading the following article dealing mostly with explanation of terms and the Forex market scheme of work.

Any basic Forex information would not be full without explanation of what Forex means. Forex market or sometimes called as FX stands for a foreign exchange market (also known as “currency market”) where people – traders and brokers – are involved into buying and selling world currencies against each other. At the moment a lot of people join Forex market as traders due to great popularity and huge financial base and opportunities this market can offer even if comparing it with stock exchange markets. Besides approximate daily trade results which Forex and related markets show are really impressive –more than 3 trillion USD – which is over all results of all U.S stock markets. Due to the fact that trading at Forex market can be conducted all over the world by means of the Internet and other communication means like fax and phones Forex trading is also considered as one of the most convenient and easy to use ones comparing with stock markets.

If you want to start your Forex education in a correct way you need to learn to distinguish Forex market and stock market scemes of work because many newbies suppose by mistake that these two markets work basing practically on the same principles and using the similar tools and instruments. There are plenty of differences but only two of them denote the evident dissimilarity between these types of markets:

1) Difference in trading hours. The main advantage of Forex market is that it works 24/7 without breaks and day offs. Forex information and trading itself can be provided from three continents from a lot of big cites like Tokyo, London, New York, Zurich and many others which allows following and reacting in a proper way at various and fast fluctuations happening at Forex market. As for the stock markets – they open at Sunday night and close on Friday evening.

 2) Commissions can be different. Online electronic Forex trading and high competition created circumstances making possible reducing in bit-off spreads (equals to stock commissions). Such spreads cover all those risks which are inevitable when one deals with the market makers. Many people find Forex spreads rather low but any spread can rise if the currency liquidity drops due to some reasons. Besides such Forex commissions considered as the lowest ones according to trade sizes comparing with stock markets in spite of the fact that lately FX commissions have been reduced. In the most Forex trading houses leverage is offered as 100 to 1 (for example a trader who can suggest a deposit fund of 10 000 USD can leverage this sum up to 1 million USD). Such situation involves interference of speculators who can narrow a pip spread but government and the hugest banks impact on prices and commissions as well so the chances are equal. Besides never heed that stock markets offer all participants involved into trading an equal level of an access and practically the same prices while the Forex market suggests few totally various levels of an access where commissions and spreads differ from every next level. The hugest investing banks involved into Forex trading can offer the lowest spreads.

Why spreads are so important in Forex trading?

Any initial Forex information presupposes explanation of spreads functions and meaning. To explain what is a spread we need to appeal to such terms as the BID price and the ASK/OFFER price. The BID price means the price at which a trader can easily sell one unit of any base currency offered at the Forex market (or buying one of secondary currencies) and the ASK/OFFER price stands for the price used by a trader for buying a unit of one of base currencies.

The following example explains this in practice – if the exchange rate of the currency pair EUR/USD equals to 1.3473/1.2476 it denotes that a trader should pay 1.2476 USD to buy one Euro (which is obviously a base currency) and if a trader sells one Euro he will get 1.3473 USD. You see, it is not so hard to figure out. As you have noticed the BID price was lower than the ASK/OFFER price and that tiny difference between these two prices is called a spread which is measured in “pips” (1.2476 - 1.3473 = 3 pips) and in such way denotes the possible profit and the dealing room used in the Forex trading houses.

And the last piece of Forex information we want to discover deals with retail Forex trading. The mentioned before market makers or also known as retail Forex brokers work representing retail customers and capture one of the smallest niches of the Forex market. Due to the dry statistics data – retail Forex broker is responsible for estimation of the total volume of retail trading which equals up to 50 billion per day (around two percent from the total value of the whole Forex market). However this segment shows a tendency to grow lately because of appearing high quality Forex trading platforms and individual traders using these platforms.

How to become a Forex broker

Many people interested in foreign exchange market or simply in Forex trading want to know how to become a Forex broker and what skills are required for this kind of occupation. Due to the great popularity of Forex market plenty of interested people are looking for occupations which are related somehow to the international and the most profitable financial FX market.

Most of such job-seekers choose a profession of a Forex trader because they want to earn huge sums of money while the others stick to an idea that a job of a Forex broker is more reliable and provides reduced risks comparing with Forex trading. Each of them is partially right but we want to say that a Forex broker really experiences less amount of risks so if you do not belong to adventurous type of human you better think about choosing an occupation of a FX broker as an alternative to Forex trader profession because awards these guys get are really worth of it.

So what things you need to have, know and understand in order to become a successful Forex broker?

1) Foremost you need to understand how Forex market works. We mean really understand all those important trifles and nuances concerning complicated and at the same time rather simple scheme of work of the foreign exchange market. That is why never save money and your time on a proper Forex education. Reading web articles, buying and studying every book and special literature you will manage to find, visiting conferences and seminars and listening to educational courses of the Forex experts: all this is the list of educational means you should use in order to become a real pro in this filed. Make sure that you learn the modern slang and nomenclature every contemporary Forex broker should know. Pay heed to the basics: most widespread Forex trading systems, mechanisms, automated Forex trading software and its setting up, functional and technical analyses and so on. Your prospective clients: Forex traders will ask your professional opinion and advice. You have to be ready for explaining certain nuances to newbies and to experienced traders as well.

2) You need to find a teacher: an experienced Forex broker: who is quite professional and can introduce you in the verse of the Forex market, its trading strategies and explain all requirements this hard and day-to-day routine job brings. Such practical point of view along with theoretical background can help you to reach professional heights and build up a perfect career as a Forex broker. Do not get lazy then and browse in the Web in order to find the announcements in your area concerning seminars leaded by professional Forex experts, visit special discussions groups where traders and brokers with different level of experience can meet and talk about the latest trends and schemes of the Forex market trading.

3) Any Forex broker also should obtain a professional certificate proving his educational degree whether in economics or in business management. There is also an organization which provides all Forex traders with specific certificates in the filed of the Forex trading and brokerage: it is called the National Association of Securities Dealers - and offers a test everyone can fulfill if he or she positions himself/herself profound enough in this sphere. Bear in mind that positive results of this text will make your career as a Forex broker more successful especially if you have a college degree in business or/and economics.

Exploring Basics of Technical Forex Analysis

For those who only make their first steps in the Forex trading and try to figure out how this huge financial market with plenty of opportunities to earn the fortune works such words as technical or fundamental analysis mean nothing or at least a little. Due to the fact many people risk in order to gain something at this available and free for any sort of speculation with currency exchange rates market it requires knowledge concerning the most widespread strategies used by experienced traders who are quite successful in earning money at the FX market.

As it was mentioned there are two types of analysis exist at the FX: technical and fundamental. While fundamental Forex analysis is based in gathering and analyzing Forex trends of past technical analysis is grounded on studying of price charts in order to make forecasts concerning any prices fluctuations of any currency pair. As you may guess knowing basics of technical Forex analysis can serve as a solid background when you as a trader have to decide whether to buy or sell currencies at the FX market.

The following issue concerns certain aspects of technical Forex analysis so you could get a full picture of what benefits it may give you if you study the basics.

The major purpose of the technical FX analysis is in studying price charts and this knowledge is quite enough to forecast any sort of fluctuations. For sure traders which use this Forex analysis's methods commonly have to follow the latest economical, political news in order to take them into account while analyzing the details within the price charts which help to predict price movements and their direction. That is why the most obvious purpose of the technical Forex analysis is to make money predicting possible changes within a certain price chart. Accurate analysis can make one a prosperous man and that is why no wonder many newbies try to figure it out.

Methods of the technical Forex analysis include a variety of different techniques centered on studying price charts particularly. In the core of this analysis lies the estimation and forecasting of actual price action which is usually not so changeable but modern software offers such innovative tools for accurate setting up of charts that many traders can learn them in few months which is really fast taking into account a great amount of details and nuances. In addition to this the technical analysis involves formulas appearing on the top of the certain price charts.

If we talk about Forex trading strategies we should mention technical analysis for sure because many effective and efficient trading strategies planned by Forex traders are based on this type of analysis for instance such as trend recognition and moving averages. Such strategies are planned by traders in order to lessen any risks to lose money to minimum and that is why they can be modified with methods taken from the fundamental Forex analysis. Let's say that any good FX trading strategy is factually based on technical analysis and involves elements of fundamental analysis as well.

How Can One Develop and Sell a FX Robot?

Ask yourself how many times you have seen the ads in the Web offering to Forex traders to visit a website and buy/try or at least read about a new Forex robot. For sure, at least few times everyone has seen such ads but have you ever thought about making money by designing and selling your own Forex robots. If such a great idea visits your mind from time to time then you should definitely read further because we will tell you the secrets of how you can design and sell your own FX robot software.

Do we even have to say why FX robots are so popular nowadays? Because everyone is a bit crazy about those innovative automated and autopilot FX trading programs which are a real bliss especially for those Forex traders who like an idea of a successful trading without having reliable theoretical background and practical skills and relying only on expensive Forex software. We can’t approve such method but still confirm that Forex robots can be very useful especially if your Forex education was quite good from both theoretical and practical points of view.

Add to this fact such functions as constant controlling and managing your trades according to these parameters 24/5 any FX robot can provide and you will get an assistant that can help you without breaks because it doesn’t require sleeping and eating. Relying on a robot you can stick to your habitual schedule even providing a parallel working in the office being distracted from time to time thanks to the integrated tools which can send to a trader alerts about the upcoming changes at the Forex market so a person could respond in a proper way. So, if you are highly interested in making your own Forex robot because you want to earn money by selling its copies to other traders or simply because you want to have Forex robot software tuned up especially for oneself then follow the next advices.

How to design and then sell a FX robot?

Many new Forex robot builders and designers simply don’t know where to start to create really cool and which is more important a well-working program containing all necessary and maybe few additional and unique tools which can help investors, traders and brokers follow and manage their trades by means of your robot. This is not an easy task to do.

For sure, you have to be a programmer, this issue is not even worth of discussion because without certain practical and theoretical knowledge you won’t manage to build and run a robot in a proper way. From this point of view we can only recommend you to program your robot with an opportunity to gain profits which will be equal to a half or a bit less of the stop loss (your robot’s win-lose ratio should be about 66,7 percents).

Instead of the technical side we want to focus on the functions this robot should fulfill – it has to be designed to work fast, reacting quickly to all commands and is to be very customizable when it concerns tracking the latest Forex trends and displaying them as Forex charts. Besides you robot should be designed for mass exploiting which should be taken into account as well. Do not forget to build your own website where you can offer and enumerate all advantages of your robot software for automated trading.

Make sure that you use all means to promote your robot offer a subscription for a constant customers and free trial version in eager to attract more potential customers. Ask for an expert’s advise in order to organize and run your website and ad campaign properly.

FX Leverage: A Guide for Beginners

More and more people interested in getting money in a quick and reliable way appeal to the opportunities offered for them by the largest financial market of Forex: foreign exchange currency market to be more precise. However many naïve Forex rookies understand quickly that without certain theoretical background and practical experiences which one may get using beforehand demo accounts imitating live Forex trading only without real money there is no reason to start real-time trading because it will end with an epic fail at once.

From this point of view understanding what Forex leverage is can become a powerful advantage every new FX trader can use to earn few bucks at first and then perfecting his/her strategy of FX trading applying easily the most basic and required knowledge concerning Forex market.

Foremost let's focus on the definition of leverage in Forex. It stands for a great opportunity offered for online traders (not only Forex can offer this but stocks market as well) which can provide success in the FX market and can also bring disappointment leading to a trader's bankruptcy sometimes.

Applying of FX leverage can be rather useful only if one is quite aware of possible risks this tool can bring. Leverage embodies a sort of an approach for trading with other trader's money so no wonder this method has its lacks and risks to lose everything. Many people find this opportunity very advantageous at the very beginning but then understand that Forex leverage can serve as a double-edged sword. Severe guarantee (meaning here a trader's deposit arrangement) forms its main lack.

Many new traders suppose that Forex leverage serves as a trick and not quite legal which scammers use because the idea of trading other's people money seems too fantastic to be true. Nevertheless, leverage of the forex market really does it and legitimately so you don't have to worry about this. Take it as buying of a house with a mortgage and then returning money to a bank. Just imagine how many people would stay homeless without such a great opportunity a housing market offers?

Why then this opportunity can't be applicable according to the financial market of Forex or stocks as well? The only difference is that Forex leverage provides a trader with a required mortgage. In order to render a mortgage guarantee the trader's deposit fund is used.

Forex leverage is based on the following scheme of work: a FX broker gets a credit (which is usually higher than deposit) basing on a trader's deposit letting in such way a trader open much larger positions for trading and logically get more profits if a deal is successful. Commonly a FX trader having one thousand of dollars as a deposit can trade within the range of one hundred thousand dollars of a base currency in his chosen for trading currency pair. In such way typical Forex market leverage equals 1:100.

The most helpful aspect of using leverage is in the opportunity for trading within the margin and that is when proficient FX traders can apply Forex exchange leverage offer as they like. Taking into account FX leverage of no more than 1:15 and price movements a skillful trader can gain a lot of money.

What Factors Can Impact on the Forex Market?

As far as every Forex beginner knows the Forex financial market’s main purpose is to involve trading of different international currencies to get profits from the fluctuations which occur within the limits of the exchange rates between two international currencies which form a pair a trader chooses to buy or sell gaining money from such transactions. No wonder that Forex market moves so quickly and frequently because the changes within the exchange rates of certain currencies pairs happen all the time due to a number of reasons.

These reasons make trading at the Forex very inconsistent and vulnerable meaning you can whether earn a lot of money or lose everything at once simply because of unexpected changes which will affect the open trades and cause wrong decisions a trader can make. In a case you are going to stay in the profits than losing your money we advise you to read further in order to take into account certain outside the Forex market factors that influence on this financial marketplace no matter of your desire and a well planned trading strategy.
So, what factors can make you whether a rich or a poor man at the Forex market?

1) Economic and Political News Reports

The most obvious factors which can impact on your trade positions are economic news concerning the Forex market on a global level. When a country which currency you chose as a base one in your currency pair releases the latest economical news these updates can whether negatively or positively impact on the exchange rates in general and on your open trades in particular. This factor should be foremost taken into account when you start planning your own Forex market trading strategy. The same concerns the latest political news a country releases.

2) The Housing Info

Such kind of information should be considered either. What does the housing information mean? For instance, each month the United States of America releases the info concerning houses which are under contract and which were sold. You should also find the information about how many houses were built every month. Using such a strong indicator you can figure out whether economy of a country is stable or not. If a country’s real estate market is ok, you can suppose that the economic condition of a country is good as well.

3) Interest Rates

Maybe you think them unimportant but in fact the worldwide interest rates provide a huge impact on the Forex market fluctuations because they influence foremost on the currency values. For example, in the USA the so-called Federal Reserve provides certain fixed interest rates on bank loans. And if they announce a change of the interest rates this fact impacts on the value currency (in this particular case – the USD). Consequently the changes in the value of a currency can cause changes of the Forex market exchange rates between different international currencies.

To conclude, we should say that these are the most obvious and important factors which impact on the Forex market and the exchange rates fluctuations. Lots of other not so important factors but still impacting on the Forex should be considered as well.

Forex Online Trading Systems: What A Newbie Should Know?

Since that great times when the Internet became very available for all social layers the Forex exchange market has started to flourish because the constant income of money and new traders who began to try themselves as online FX traders. Since those days and till nowadays Forex online trading systems are in high demand especially the successful ones because if a trader uses one of them he/she can expect to earn money without leaving his/her own home. Such way of earning your money for living seems to be good to be true and that is why many beginners after few failures begin to say that there is no such thing as reliable Forex online trading systems and there are only scammers and predators in the Web who try to worm out your money. Let’s try to figure if this statement is true to life.

No one says that Forex online trading systems are all good and give a 100 percent guarantee that a trader will earn his money at once. You see, the Forex market is very changeable and it is rather risky to trade on it even if you have taken into account all possible factors that can impact on your trades and calculated the best trading strategy. The only advice here is to practice and practice as long as you can afford within the limits of a demo account which can show how tough and unexpected the live Forex trading can be. Having such experience you can start the live trading but only with very small amounts of money to lose.

You as a FX newbie should understand that all Forex online trading systems are based on experience and a proper Forex education. You are to figure out how does the largest financial marketplace work and use this knowledge to derive benefits from your trades more often than losing your money. You are to know how to choose the currency pairs and read the Forex charts in order to decide whether to buy or sell and when you need to open, hold or close your trading positions. Every reliable Forex trading school or a Forex online guideline or a manual which for sure will cost you money can teach how to make a right entry in the Forex exchange market. Never save your means on your Forex education because it will bring you more money in the foresight.

Well, we can tip how you can start. Always begin from setting up a demo trading account which every online brokerage organization can offer. A regulated broker is what you need to look for. It will be great if you manage to find a Forex broker with a reputation and registered in the Commodities Trading Commission. All Forex online trading systems require you using a demo account to understand what trading at the Forex means in general. Practice with fake money before starting to lose your own money (prepare to lose at first because it is very complicated for a newbie to provide any of the most successful Forex online trading systems).

Remember that the Forex market is open 24/5 which means you can literally trade all days and nights long without stops (in theory for sure). Appeal to different online communities and never ignore the recommendations provided by more experienced Forex traders who managed to earn a fortune at the Forex market. Be open and share your own experience as well.

The Basic Forex Glossarry

Before starting and getting to know the most profitable Forex trading strategies every newbie needs to learn the so-called Forex glossary: basics and terms required for adequate beginning of live Forex trading. In a case you have heard about Forex but have never tried to become a FX trader we will tell you the most common terms and definitions you will have to learn as ABC in order to earn but not lose money while trading in the FX Market.

The first term we want to explain is Forex itself. It stands for the short for foreign exchange market where traders and brokers trade currency pairs in order to earn profits. Sometimes you can meet such short abbreviations as FX and similar to it but Forex is the most widespread one. Now when you know what this term means let's consider the most common basic terms you will require from the very beginning of your live trading in the FX market.

1) Ask Price. Every Forex glossary starts with this term denoting the price using of which trader can purchase the base currency. For example if you suppose that USD value will increase in foresight then you can select to buy this currency for any other currency like EUR according to the price that displayed in the so-called ask quote.

2) In order to explain what base currency is we should say that it denotes the first currency which is listed in any currency pair used for trading in the FX market. For instance, if the currency pair's rate of EUR/USD is 1.3223 then the EUR becomes the base currency and its value is 1.3223 USD.

3) The bear term according to the FX glossary denotes a market with pessimistic diagnoses and declining prices.

4) While the bull according to the same Forex glossary stands for a market with rising prices and more optimistic trends.

5) There is such common term as bid price many Forex newbies can't define. The bid price (displayed usually as the left quote) stands for the price traders may use in order to sell any base currency.

6) Another term in our Forex glossary is the counter currency. The counter currency is simply the second currency in a pair. And usually value of it is predetermined by the opposite base currency's value. It is easy to explain - in the pair EURUSD the second which means USD is the counter currency.

7) As for the cross rate it is a price quote composed of any currency which is quoted against any other currency which can't be related to USD. This quote is the combination of the individual rates for exchange 2 currencies against USD.

8) There are many ways to trade in the FX but all of them are based on certain strategies and the most popular type of Forex day trading strategies which means a trader uses the method based on opening and closing his trading positions during one trading day and to the end of this day a trader has no any position open.

9) Another important term in the FX glossary is Fed meaning the short for Federal Reserve which in its turn denotes the central banking system effecting significantly on the trends of the Forex market.

10) Every Forex glossary contains the term leverage because it is the basic term in Forex vocabulary. It means the loan a trader takes for the FX broker which allows trading only having a small capital. In such way one can increase his profits but the risks get higher as well.

11) Margin is another term every trader should understand and it denotes the minimal amount of cash deposit a trader can put up for a certain transaction. Losses increased but the profits as well so one should think twice before trading FX on margin.

12) What is a pip? Pip is the smallest price which can be found in the last number of the currency pair rate. Commonly it is the 4th digit located after the decimal point.

13) As for the price trend it means a stable movement of the currency prices with a certain direction. Spotting trends can capitalize the potential.

14) Forex spreads stand for the differences between the ask and the bid prices.

15) The last term in out FX glossary is stop loss which stands for the trade order which closes an open trading position in automatic way for preventing losses if the FX market fluctuates against this chosen position.

Forex exchange & market introduction

Foreign Currency Exchange (Forex) Trading allows an investor to participate in profitable fluctuations of world currencies. Forex trading works by selecting pairs of currencies and then measuring profit or loss by the fluctuations of one currency's market activity compared to the other. For example, fluctuations in the value of the U.S. Dollar are measured against another world currency such as the British Pound, Euro, Japanese Yen etc. Being able to discern price trends in forex market activity is the essence of all profitable forex trading and this is what makes foreign currencies so exciting, currencies are the world's 'best trending' market. This gives Forex investors a profit making edge that is unavailable in most other markets.

Forex trading is being called 'today's exciting new investment opportunity for the savvy investor'. The reason is that the Forex Trading Market only began to emerge in 1978, when worldwide currencies were allowed to 'float' according to supply and demand, 7 years after the Gold Standard was abandoned. Up until 1995 Forex Trading was only available to banks and large multinational corporations but today, thanks to the proliferation of the computer and a new era of internet-based communication technologies, this highly profitable market is open to everyone. The Forex Trading Market's growth has been unprecedented, explosive, and continues to be unequaled by any other trading market.

Unlike traditional trading which brings buyers and sellers together in a central location (trading floors) in Forex Trading there is no need for a centralized location. Forex is a market where worldwide traders conduct business by high-speed Internet connections with the Interbank Foreign Currency Exchange via Forex Clearinghouses (also called Forex Brokerage Firms). Forex has not only become the fastest growing trading market, but also the most profitable trading marketplace in the world.

Simply stated, Forex is the most profitable because it is the world's largest marketplace. The Foreign Currency market as a whole accounts for over 1.2 trillion dollars of trading per day (as determined by the fourth Central Bank Survey of Foreign Exchange and Derivatives Market Activity, 1998. This figure is understood to be significantly higher today). To put this into perspective, on any given day the Foreign Currency Exchange Market activity is vastly greater than the Stock Market. It is 75 times greater than the New York Stock Exchange where the average total daily value (using 1998 figures) of both foreign and domestic stocks is $16 billion, and much greater than the daily activity on the London Stock Exchange, with $11 billion.

Furthermore, in addition to being the world's largest and most profitable market, The Foreign Currency Exchange Market (forex) is the world's most powerful and persistent trading market regardless of negative economic indicators. This is because currencies 'trend' better than every other market due to their macro-economic nature. Unlike many commodities whose supply and demand fundamentals can literally change overnight (as we found in the sudden dot com 'market adjustment' and even more abruptly on September 11, 2001), currency fundamentals are much less random, and far more predictable. This is well illustrated in the way interest rates are changed gradually and only in small increments.

Other examples of fundamental predictability are illustrated by the following statistics. Of the $1.2 trillion day trading in Foreign Currency Exchange, 83% of spot foreign exchange activity and 95% of swap activity involves US Dollars. The Euro is the second most active currency at 37%. The Japanese Yen (24%) and the British Pound Sterling (10%) are ranked third and fourth. The Swiss Franc is 7%, and the Canadian and Australian Dollars account for 3%.

Spot Forex is the type of forex trade in which self-traders concentrate most of their investment activity for reasons that are self-explanatory. By definition, a Spot Forex transaction is a currency trade transaction that has a settlement (liquidation) within a maximum of 2 working days following the closing of the trade. Therefore Spot Forex allows the self-trader high liquidity. Another popular feature for well-advised Spot Forex self-traders is the strong profit potential from continual market fluctuations by buying a specific currency when it is weaker and selling it when it is stronger, and the continual pairing of strong currencies against weak ones. This potential for profit or loss is amplified by the effect of leverage. Leverage is a term that describes what can be achieved when a smaller amount of money controls a much larger amount of money. With regards to Forex Trading for example, a leverage-factor of 100 can allow the trader to hold a 100,000 US Dollar position with a modest 1,000 US Dollar margin deposit. Online Forex day trading focuses its investment activity largely on Spot Forex because of the 'risk manageability' of in-and-out trading plus the potential to generate excellent and highly liquid profits.

"Few financial industries generate as much excitement and profit as currency exchange. Traders around the world enter trades for weeks, days or split seconds, generating explosive moves or steady flows, and money changes hands quickly at a staggering daily average of a trillion US dollars. Forex profitability is legendary. George Soros of Quantum Fund realized a profit in excess of 1 billion dollars for a couple of days work in September 1992. Hans Hufschmid of Soloman Brothers, Inc. netted $28 million for 1993. Even by Wall Street standards, these numbers are heartstoppers".*

Despite its high trading volume and its fundamental role in the world, the Forex Market is rarely in the media limelight because its method of trading transaction is less visible than the Floor of a Stock Exchange. However, trading on the Foreign Currency Exchange Market is today surging into the public awareness, as flocks of internet traders are attracted by the market's inherent profitability and risk manageability. Add to this the absence of geographic or temporal boundaries and vibrantly active Forex market is open to all players.