Introducing Foreign Exchange (Forex)

Foreign Exchange Trading is the buying and selling of different currencies. Better known as FOREX, it is a fast paced but highly lucrative process. To make a decent head start in the industry, it is best to remember a few important factors.

In Foreign Exchange Trading or FX Trading, clients are able to hedge against, or speculate upon, changes in the exchange rate of two currencies. For example, a speculator can be long EUR/USD in foreign exchange market in order to profit from capturing the appreciation of Euro against the U.S. Dollar. Foreign exchange services provide an opportunity for clients to trade FX. Foreign Exchange Trading is done on the foreign exchange market.

Each currency in the FOREX trading industry is assigned a three-letter code. Because many countries use currencies with the same name (e.g. the dollar or peso), it is extremely important that traders are familiar with these codes.

Where an exact same currency is used in various countries, then the code remains the same. For example, the Euro is used across much of the European Union, so the same code (EUR) would be used for France, Germany, etc.

Other examples of three-letter codes include the US dollar, which is assigned (USD), the Australian dollar (AUD), the Chinese Yuan Renminbi (CNY), the Chilean peso (CLP), and so forth.
Just as with any trade industry, the main purpose is to make a profit, by buying low and selling high. Thus, in FOREX trading, one must always find the opportunity to buy one currency low, and sell the other high.

Traders must also be aware of trading hours and which markets across the globe are open or closed. For example, due to time differences, the market in London would be open or closed at different times to that in Tokyo. While Frankfurt, London and New York open at 2:00am, 3:00am and 4:00am respectively, Sydney and Tokyo do not open until 4:00pm and 7:00pm, on Eastern Standard Time.