If this is the first time you trade, this course will help you understand the basic of the financial market, Indices, Forex and commodities. In this course, you will understand how the market operate and how you can profit from it. So to begin, let's answer the fundamental question: Why do we trade?
Join NowLet's say you wish to convert some of your money to Japanese Yen for your trip to Japan, without realising it, you have already participated in the Forex Market:
The Forex market is where individual and cooperative trade one currency for another.
Forex is the largest financial market in the world, with an average 5.1 trillion US dollars worth of currencies traded every day. The Forex market drawfed the global stocks in comparison which "only" have $84 billion average daily trade volume.
Beside individual and cooperative, Forex is also important for the government and central bank. This is because foreign currency reserve is essential to stabilise your domestic currency and by extend, providing international investors a stable environment to invest it.
Anyone can participate in the Forex market. Individuals can participate for the purpose of capturing from a market opportunity. For government body, it tend to be to stabilise their domestic currency.
And for investment banks such as Citigroup, Deutsche Bank, Barclays Bank, JPMorgan Chase and UBS who is responsible for over half of the Forex trades, it is to generate profits from the Forex market.
At the end of the day, individuals and investment banks trade in the Forex market for one main reason:
To profit from the market
Because of this, most traders does not necessary want to go through the tedious process of exchanging currencies and rely on CFD and spread betting to trade in the Forex market.
As for the main players of the Forex market, the investment banks, they conduct many small trades or a daily basaes and accumulate large profit from it.
Obviously, one might exchange a currency to purchase a good or invest in a foreign country.
When a trade occurred between two different countries, it is necessary to convert one currency to another.
While by no mean, these transactions are small in term of volume, they are still insignificant when compared to the trade volume of the Forex traders.
Unlike traditional shares, Forex trading is conducted electronically over-the-counter (OTC) and does not required a centralised exchange.
And with no centralise centre, that means you can always trade Forex during the working hour of some of these financial centres such as London, New York, Sydney and Tokyo:
Forex is usually traded in pair. So for example, if you wish to trade USD/JPY with Chinese Yuan, then you will need to convert Yuan to USD.
When you sell a currency in the Forex market, you will purchase the opposite currency within the currency pair and vice versa when buying.
The symbol of the currency contains three letters, the first two letters representing the country of origin and the last representing the name of the currency:
For example, the Chinese Yuan's symbol is CNY and the United State of America Dollar's symbol is USD.
In a currency pair, the value of one currency being quoted against the other. The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency.
For example, USD/CNY=7.12823
This means for 1 USD, you can exchange 7.12823 Yuan
If you think that USD/CNY will appreciate, then you can profit by longing USD/CNY and you will be rewarded if the USD appreciate against CNY.
Vice versa, if you predict that USD/CNY will depreciate, then you can short the currency pair instead.
