Forex Trading Programs Blog

Forex is an abbreviated name for “foreign exchange.” The Forex trading market is an around-the-clock cash market where the currencies of nations are bought and sold, typically via brokers. For many years, the market was dominated by large institutions such as banks and brokerage firms. However, the market has experienced a major change over the past several years, as a growing number of private investors and traders just like you have started to actively participate and trade. The purpose of this article is to reveal 12 interesting facts about the Forex trading market.

1. What is a Forex trading system? According to Howard Abell, “The [Forex] trading system gives the trader the ability to control his or her emotional states rather than allowing them to control him. A [trading] system is a disciplined method for organizing dynamic, ever-changing market phenomena.”

2. It is the most liquid market in the world, thus making it easy to trade most currencies.

3. Unlike equities or futures trading, you pay no commissions on the Forex deals that you make.

4. According to the Wall Street Journal Europe, the most commonly traded currencies on the Forex market are the U.S. Dollar (USD), the Japanese Yen (JPY), the Euro (EUR), the British Pound (GPB), the Canadian Dollar (CAD), the Australian Dollar (AUD), and the Swiss Franc (CHF).

5. The most commonly traded currency pairs are the U.S. Dollar and the Japanese Yen, the U.S. Dollar and the Euro, and the U.S. Dollar and the Swiss Franc.

6. The U.S. Dollar is involved in nearly 90% of all Forex transactions.

7. Ten financial institutions account for nearly 73% of the total trading market volume. The Top 10 most active traders include Deutsche Bank (17.0%), UBS (12.5%), Citigroup (7.5%), HSBC (6.4%), Barclays (5.9%), Merrill Lynch (5.7%), J. P. Morgan Chase (5.3%), Goldman Sachs (4.4%), ABN AMRO (4.2%), and Morgan Stanley (3.9%).

8. The five major Forex trading centers are London, New York, Tokyo, Sydney, and Frankfurt.

9. The three major Forex trading countries are the United Kingdom (32.4%), the United States (18.2%), and Japan (7.6%).

10. Currency market players typically use “Forex analysis” as a means of predicting currency price movements. Forex analysis is divided into two types: fundamental and technical. A fundamental analysis uses economic and political factors, such as unemployment rates, interest rates, or inflation, as a means of predicting currency movements. A technical analysis uses reliable historical data as a means of forecasting these movements. The technical analyst believes that history repeats itself over and over again.

11. Some traders depend on fundamental analysis while others depend on technical analysis. However, many successful traders use a combination of both strategies. The important point to remember here is that no one strategy or combination of strategies is 100% certain.

12. Margin is referred to as the collateral needed to facilitate the deal. Usually, this is a very small portion of the entire deal, say 1% or 1:100. Please note that margin is a “double-edged sword.” Without the proper use of risk management tools (for example, the stop-loss option), you can experience substantial losses as well as gains. We suggest that you take complete advantage of stop-loss and take-profit options in your trading.

Trading Forex on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.

By: Greg DeVictor

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