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Forex Trading In A Falling Market
By John | July 14, 2010
Unlike trading on the stock market, Forex is not conducted on a central exchange.Trading takes place directly between two parties necessary to make a trade over the telephone or on electronic networks all over the world through the main centres in Sydney, Tokyo, London, Frankfurt and New York. It’s this planet-wide distribution of trading centres that makes the Forex market a genuine 24-hour operation.
Forex trading is nothing more than the simultaneous buying of one currency and selling of another one. The currency combination used in the trade is called the cross (e.g. Euro/US dollar, GB pound/Japanese yen).The most commonly traded currencies are the “majors” – EUR/USD, USD/JPY, USD/CHF and GBP/USD. The most important (and biggest) Forex market is the spot market, so called because trades are settled “on the spot” (although in practice this means two banking days).Forward outrights are the other common settlement practice, meaning that even if the trade itself is carried out immediately, there is a small interest rate calculation for the value date specified in the trade to be added. Foreign exchange is normally traded on margin. A relatively small deposit can control much larger positions in the market and you can buy and sell assets of significantly greater value than the capital in your account.
One of the other major attractions in Forex trading is the opportunity to trade 24 hours a day from Sunday evening (20:00 GMT) to Friday evening (22:00 GMT). This gives you a unique opportunity to react instantly to breaking news that is affecting the markets and lends itself very well to an online trading approach.The Forex market is also so liquid that you will always find buyers and sellers to trade with. The fact that Forex is often traded without commissions also makes it very attractive as an investment opportunity. However, the real appeal of Forex in a falling market lies in the fact that, rising or falling, the market is constantly moving.No matter what happens, there will always be trading opportunities, whether a currency is strengthening or weakening in relation to another currency and a good chance to make a profit if you call it right.
Topics: Investing |
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