Information on FOREX Trading

The term forex trading refers to exchanging currencies on the foreign exchange market. Trading is almost entirely carried out online, rather than in a centralized location like stocks traded on an exchange. Although corporations, governments and financial institutions use the forex market to shift large sums from one currency to another, most of the trading volume is due to traders speculating in an effort to profit from changes in currency exchange rates.

Currency Pairs

Currencies always trade in pairs. For example, the largest volume pair is the euro and U.S. dollar, listed as EUR/USD, followed by the exchange rate.

Time Frame

Forex trading starts each week on Sunday at 10 p.m. Greenwich Mean Time and continues 24 hours a day until 10 p.m. GMT on Friday.

Transaction Size

Most forex transactions are based on "lots" of currency. One lot of U.S. dollars is equal to $100,000, so a trader might buy $100,000 worth of euros or Swiss francs.

Margin

Forex transactions are conducted with very low margin requirements. Traders often put up no more than $1,000 to buy a $100,000 lot of currency.

Pricing

Forex pricing is based on the "pip," which is the smallest possible price change. For the U.S. dollar, one pip is equal to 0.01 cent.

Regulation

There is little formal regulation of the forex market. The U.S. Securities and Exchange Commission suggests trading through a broker who is a member of the self-regulating National Futures Association.

References

• Earnforex.com: Forex Trading Resources
• SEC: Foreign Currency Exchange
• Forexbeginners.net: What is a Pip?

Resources

• National Futures Association
• ForexPractice.com: Forex Practice Accounts
• Infoproductsllc.com: Introduction to Forex Signals