Forex Trading 101

Forex trading is a potentially lucrative and very exciting branch of trading. Along with all the excitement of foreign exchange trading comes with a sizeable amount of risk. It is extremely important that you really understand the implications of the various pitfalls and implications of margin trading that forex trading often entails.

There is no certain and unified foreign exchange market. Because of the over the counter demeanor of currency markets there are instead a variety of interwoven marketplaces. In these marketplaces there are different currency instruments that are traded. What this means is that there is no single dollar rate, but instead a number of different prices (rates) and the number you see depends on what market maker or bank is trading.

There is really no insider information in the forex markets. Since exchange rates are calculated by actual money flow as well as by the outlook of financial flowage, which takes into consideration such things as inflation, GDP changes, trade and budget deficits and surpluses, as well as interest rates, it would be difficult to come across so-called ‘insider information’. All of these factors are self-evident, though different projected outlooks may prove more accurate than others.

If you’re interested in pursuing forex trading, there are retail forex brokers. These market makers deal with only a tiny fraction of the total volume of $25 billion to $50 billion per day, which is only about 2% of the entire market. Retail foreign exchange trading has increased over the last few years and continues to do so. Experts say so have the forex trade scams increased. It’s a good idea to do your homework before signing on with a retail foreign exchange broker.