Forex Information

Welcome to OnlineForexTrading.co.uk your mini guide to online Forex trading, where you’ll be able to find out key information about Forex, Forex trading, Forex tips and many more.

Forex Currency Exchange

Forex, Fx, Spot Fx or Currency market are all names that refer to the foreign exchange market- a market where currencies are bought and sold according to an exchange rate. The market came about in the 1970s when President Nixon scrapped the Gold Standard. This allowed for currencies to fluctuate, and hence, created the potential for making profit off of trading currencies. Forex is the largest financial market in the world, averaging $4 trillion in daily trading volume, which is about 16 times the average trading volume of the New York Stock Exchange.

Forex Trading

Since the beginning of this market until the 1990s, the main currency traders were big banks and large financial institutions. This was due to the minimum monetary requirement to enter the market, which ranged from $10 million up to $50 million. What made it really open to the average person was the advent of the Internet, which made trading in smaller volumes with no minimum criteria possible. This has allowed for Forex trading systems to diversify, permitting more Forex brokers to exist and encouraging Forex trading software applications to be developed in order to streamline currency trading for average online users.

Here are a few Forex tips about currency trading:

Exchange rates

Unlike stock markets, there is no need for a lot of inside information in order to foresee market trends. Exchange rates are built on confidence in a certain currency, which ultimately stems from good macroeconomic indicators, providing a specific country is performing well from an economic point of view. One can have free access to this kind of information by reading economic-focused publications, guides, country pages and so on.

The key is that currencies are exchanged in pairs. You can sell USD to buy British pounds and so on. The exchange rate establishes the value of one currency relative to another. This means when one evaluates possible market trends, those need to be specifically related to the trading pair. For example, if the value of the American dollar declined as compared to the British pound, is it necessarily the case that it will decline as compared to all other currencies? The answer is most likely not.

The basic idea behind this is that economic indicators of each country’s performance will influence the confidence in its currency, stimulate or reduce demand, and therefore cause a change in its value. Inflation fears, debt defaults or recession fears are negative factors that will lower a currency’s value. Natural disasters, wars or deep recessions may be other factors that can lower a currency’s value across the board (i.e., relative to all other important currencies). Again, these simple economic factors are open to the public and this makes currency trading easier for average people.

Online Forex Trading

Online Forex trading involves online currency trading on an interbank rate via market makers. A market maker is a firm that quotes a buy and a sell price for a currency. Their profit comes from the currency spread, which is the difference between their buy price (the price they bought the currency for) and the sell price (the price they sell the currency to average traders for). The quotes for buying and selling are based on the market makers foreseen demand for one currency versus another one. In Forex most deals are over-the-counter. meaning a market maker sells to and buys from its clients. A market maker will allow you to set up online trading accounts.

You can get started by looking up market makers that offer a Forex demo trading session or a so-called “Forex for dummies” initiation process. You can choose between micro accounts and mini accounts according to the trading size you can afford. The benefit of Forex online trading is that it makes it possible to trade 24/7 in all sessions: the American, European and Asian trading sessions.

When trying to get started with online Forex trading, make sure you understand how the market works, and choose a market maker that will also provide you with resources for learning and getting used to currency trading.