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understanding how forex works
The forex (foreign exchange) market is the place where you can buy and sell (trade) currencies,
and it is currently the largest market today, with the amount traded reaching $2 trillion a day. In
many countries around the world currency trading is available 5 days a week 24 hours a day. In
the past, currency trading was available only for large banks and investment companies but the
Internet has made it easier for people to lean how forex works and profit from it.
How Currency Trading Works
You have three options to trade currencies, the biggest one being the spot market, as it allows
you to purchase and sell currencies based on the law of supply and demand. Another option is
the forward market, where currencies are not actually traded. Rather, two investors agree to a
contract to purchase and sell currencies at a specific time and price. In a typical forward
transaction, contracts are traded over the counter.
The third option is the futures market you trade futures contracts in a commodity exchange.
Unlike the stock market, people are making money with forex in their computer and not in an
actual exchange as you would do in the stock market.
More information are available here
The prices of currencies are based on supply and demand, and it is one of the most popular
forms of financial investments since it is relatively low risk. To make money in the forex market,
traders and investors use leverage, allowing you to manage huge amount of currencies for just a
small sum of money. The simplest way to think of it is like borrowing cash on margin so you can
increase the ROI (return on investment).
The leverage used by investors varies but a 250:1 ratio is not uncommon. What this means is you
can control currencies with a value of $250,000 with an investment of $1,000. Just like in the
stock market, you can hold your currency for months or for just a few minutes.
The basic process of currency trading is easy to understand and with the Internet, anyone can
trade and make a profit. However, it is essential you learn forex strategies so you can earn
maximum profits with minimal loss.
If you want to know more about trading forex you should go to www.howforexworks.org. This
website has a lot of information about how to profit from currency trading and how to succeed as