FOREX trading, which is also called the currency exchange, is buying and selling different currencies from around the world. As a currency trader, you make deals when a country's currency goes up or down. The idea is to buy low and sell high. Best of all, because you are trading money, you will never be stuck with a product that no one wants or a company that has gone bankrupt.
If a currency is "free-floating," its exchange rate with other currencies is set by the forces of supply and demand in the market. Exchange rates for these currencies are likely to change almost all the time, based on what banks and other financial institutions around the world say on financial markets. A system with fixed exchange rates but a way for a currency to lose value is called a movable or adjustable peg system. For example, the Chinese yuan (CNY, Y) was tied to the US dollar at a rate of Y8.2768 to $1 from 1994 to 2005. The Chinese were not the only country to do this. From the end of World War II until 1970, all Western European countries used the Bretton Woods system to keep their exchange rates with the US dollar fixed.
- The trading market of the world
As the largest market for trading in the world, the FOREX market does more than $1.2 trillion worth of business every day.
- The seven currencies of the world
- US Dollar
- Japanese Yen
- Francs suisses
- Dollars from Australia
- Pounds of England
- Euro Dollars
- Canadian Dollars
- A Market Without a Center
The market for trading currencies will never fail. If a country's GDP drops, some traders might lose money temporarily, but other traders will be quick to buy the country's currency because it is now cheaper. If enough people jump on the bandwagon and do the same thing, the currency may make a full comeback or even end up higher than before it fell.
- Day Trading
The market is open all day, every day of the year. So many traders make a living at this market every day. For example, even if the price of a certain currency doesn't reach a new high in the late morning, there are still traders who want to buy it because they think it will be worth more later in the day.
- Invest Early
Every day, the value of a country's currency is announced in the early morning. So, if you are a trader, most, if not all, of your business is done in the early morning. Buyers bet that some currencies will rise more than others.
