However, Individual Traders Are Starting To Get In The Mix, Using Internet Discount Brokers Such As Etrade To Participate In The Currency Exchange Market

Category: Finance.

The Foreign Exchange market( Forex) is truly the largest exchange in the world.

Most of this currency trading takes place between between large banks, currency speculators, central banks, multinational corporations, and other financial, governments markets and institutions. The amount of dollars traded on the Forex market on a daily basis is in the trillions. However, individual traders are starting to get in the mix, using internet discount brokers such as Etrade to participate in the currency exchange market. All trading is done over computer networks between traders in different parts of the world. There is no central exchange or meeting place for the Forex. Also, unlike the stock market, the foreign exchange market is open 24 hours per day, because it is a global market.

There are several different markets within the Forex exchange system. A trader in Hong Kong may be exchanging currency with a trader in Australia while an American trader is sleeping. First, there is the spot market. One person trades a certain amount of currency with another trader in exchange for an equivalent amount of a different foreign currency. The spot market deals with trades that are based on the current values of currencies. Spot trades take two days for settlement.

In the forward market, the buyer and seller agree on an exchange rate and a transaction date is set for a specific time in the future, at which point the trade is executed regardless of what the rates are at that time. The other two types of foreign exchange markets are the forward and futures markets. On the futures market, futures contracts are bought and sold based upon a standard contract size and maturity date. A currency quote is listed differently from a stock quote. Futures trades take place on public commodities markets. Stocks are quoted in terms of price per share. A direct quote uses the domestic currency as the base and the foreign currency as the quote.

Currency exchange prices are listed as either a direct quote or an indirect quote. An indirect quote works the exact opposite way. S. currency is equal to 75 Japanese yen. So, if you were to view a quote in an American newspaper that said USD/ JPY= 75, that would be a direct quote and would mean that$ 1 of U. If that same quote appeared in that same American newspaper and was listed as JPY/ USD= 013, that would be an example of an indirect quote. The current bid is the amount of foreign currency that someone is willing to spend in order to buy$ 1 U. As with stock prices, currency exchange prices have a bid and ask spread.

S. base currency. S. base currency. The ask is the amount of foreign currency that someone is demanding in order to be willing to sell$ 1 U. The Forex markets are generally considered to be less volatile than then stock market because within the course of a trading day, it is highly unlikely for the value of a single currency to move all that much. Sometimes, the Forex can, however be volatile. With equities, it is not uncommon for a trader to buy a stock, and then a negative press release causes the stock to lose considerable value within a day or even a couple of hours. If there is a significant economic or political development with a certain country, the currency of that country can lose value quickly.

So, it is easy to sell your position in a certain currency even when the value of that money is going down. There is a higher degree of liquidity on the currency exchange then there is on the stock exchange because the currency exchange is open 24 hours per day and because the very nature of currency exchange is to bet on when certain currencies will go up or down. A plummeting stock is more difficult to unload, but not impossible. Start slowly, then as you get the hang of it, work your way up to larger trades and higher volume. If you want to begin currency tranding, try to set aside some money and open an account with an online broker. However, do not gamble your nest egg on currency trading because inexperienced traders can lose everything they have rather quickly in spite of the relative safety of the Forex market.

Read more...

If The Stock Gaps Down, I Still Sell Both Options - Finance Articles:

We are currently in earnings season- a time when companies announce their earnings results from the past quarter. But, as a trader you can learn to capitalize from this volatility and profit from some unique trading opportunities.

You Can Obtain A Car Loan With A Little Bit Of Creativity On Your Part - Lidia Pouncey about Finance:

You filed for personal bankruptcy and your options for obtaining any loan from a creditor are severely limited. What to do?

S. -China Aviation Summit - Taylor Allinder about Finance:

The DOC recently released the 2007 National Export Strategy, which outlines the Bush administration s priorities for promoting U.