What am I buying and selling in the forex market?

Age : 25 Joined : 17 Jan 2008 Posts : 3 Location : ibadan

Hi,i'm new to forex and just want to know what exactly am i buying or selling in the forex market?

Age : 24 Joined : 15 Jan 2008 Posts : 4 Location : Nigeria

Hi Majekodunmi, if you are still that young in forex, plz refer to www.babypips.com.

"If you love it, you will give it your all"

Joined : 23 Dec 2007 Posts : 241 Location : Nigeria

The forex market is the largest market in the world. According to the Triennial Central Bank

Survey conducted by the Bank for International Settlements, the average daily trading volume

reached $3 trillion in 2004. This huge trading volume provides the forex market with excellent

liquidity, which benefits the large number of traders that invest there. The growth of the forex

market has been spurred by the development of electronic trading networks and the increase in

globalization.

Specifically, the forex market focuses on the trade of currencies by both large investment banks

and individuals around the world. All trading is done over-the-counter, which adds to the

market's liquidity, allowing trades to be made 24 hours a day. Trading can be done in nearly all

currencies, however, a small group known as the 'majors' is used in most trades. These

currencies are the U.S. dollar, the euro, the British pound, the Japanese yen, the Swiss franc,

the Canadian dollar and the Australian dollar. All currencies are quoted in currency pairs.

When a trade is made in forex, it has two sides - someone is buying one currency in the pair,

while another individual is selling the other. Although the positions traded in forex are often in

excess of 100,000 currency units, only a fraction of the total position comes from the investor.

The remainder is provided by a broker, which offers the leverage needed to make the trade.

Traders look to make a profit by speculating that a currency's value will either appreciate or

depreciate against another currency. For example, assume that you purchase US$100,000 by

selling 80,000 euros. In this case, you are speculating that the value of the dollar will increase

against the euro. If your bet is correct and the value of the dollar increases, you will make a

profit. In order to collect this profit, you will have to close your position. To do this, you must sell

the US$100,000, in which case you will receive more than 80,000 euros in return.

Traders are not required to settle their positions on the delivery date, which usually arises two

business days after the position is opened. Traders can roll over their positions to the next

available delivery date. However, if a trader takes this route, he or she is left open to incurring a

charge that can arise depending on his or her position and the difference between the interest

rates on the two currencies in the pair.
www.forexgreenland.com

hi,majek,buying and selling currencies are done in pairs.but u can ask,why are currencies traded in pairs? What makes up a currency pair? How can you tell what a currency pair is worth? And exactly what currencies easily trade in pairs so you can invest in them?

This is important to know - because once you understand currency pairs (like the USD/JPY or EUR/USD), you can start trading in the foreign-exchange market, if that's your goal. So let's dig right in.

Why are currencies traded in pairs?

Currencies are traded in pairs because you only know what a particular currency is worth when you relate/compare it to another currency. That's how you can tell if a currency is strong or weak. For example, you could only tell the value of the Swiss franc in terms of how many euros will buy you a Swiss franc, or how many dollars will buy you a Swiss franc.

What makes up a currency pair?

Currency pairs have two parts, the "base currency" and the "quote currency." The base currency is the first currency listed in the pair. The quote currency is listed second. And you can tell what the pair is worth by how much quote currency a base currency is worth.
For example, if you look at the pair EUR/USD, the euro is the base currency and the U.S. dollar is the quote currency. And by looking at this pair, you're trying to determine what a euro (the base currency) is worth in dollar terms (the quote currency).

How can you tell what one is worth?

First of all you can look at a graph, a quote screen or a website that tracks currencies. Any place you look, they will list the currency pair as a fraction or decimal. It's showing exactly what the base currency is worth in relation to the quote currency.
For example if you looked at the EUR/USD and it said "1.59," that would mean that 1 euro is worth US$1.59. If you were looking at a chart, it would show you how the euro is strengthening in relation to the dollar.

What Currencies Trade in Pairs?

USD = U.S. dollar
EUR = Euro
GBP = British pound
JPY = Japanese yen
CHF = Swiss franc
CAD = Canadian dollar
AUD = Australian dollar
NZD = New Zealand dollar
SGD = Singapore dollar
HKD = Hong Kong dollar

Now that you have the basics, are you ready to place your first trade?

Subject: The 24-Hour, 5-Day a Week Market Mon May 19, 2008 10:13 am

Many newbies to the currency markets get a little confused by the actual market itself. And it's completely understandable considering foreign-exchange trades are NOT placed on the New York stock exchange like regular stock trades (unless you're buying and selling currency ETFs). Cool

Instead, currency pairs trade on the completely separate foreign-exchange market - also known as the forex market, or spot market (because currencies literally trade "on the spot").

One of the major benefits of currency trading is how often the market is open for business. As you probably know, stock markets around the globe open and close each day. But if you're trading currencies, you can literally trade 24 hours a day, 5 days a week Sleep

. Let me explain.

Technically, a trading week in currencies starts in Asia around 7:00 pm EST on Sunday night, and then ends at 4:00 pm EST on Friday afternoon in New York. During that time the spot market trades worldwide, 24 hours a day. (Please be warned: Your broker may have slightly different trading times, but these are a good guide.)

Typically, there isn't any trading going on during Saturday or the earlier part of Sunday. However, on a rare occasion, there can be a few rare trades that place somewhere in the world, just not through any of the major markets most retail traders would use. afro

Tokyo Trading: Generally from 7:00 pm EST to 4:00 am EST
London Trading: Generally from 3:00 am EST to 12:00 noon EST
New York Trading: Generally from 8:00 am EST to 5:00 pm EST

So you can say that forex trading mainly occurs about 5.5 days a week, 24 hours a day during those times.

As you may have noticed, there are overlap times. That means you can trade pairs with both sessions in common.

For example, 8:00 am EST until 12 noon EST can be a great time to play the euro vs. the dollar (EUR/USD). You'll have more volume because it happens to be the time when both European and American traders are placing their trades. That can help you be more nimble in buying and selling this particular trade.

Knowing little tricks like this can help when you start buying and selling currencies like the pros do - one trade at a time.