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If trading is in your blood, then Forex trading might be something for you. Through forex trading systems you can make money trading currencies. Simply put: You buy dollars and sell them again for euros when the exchange rate is favourable. For a few years now, this market has also been open to private individuals. It is an interesting time to start with this because significant fluctuations can arise due to the credit crisis. Therefore it is also a dangerous time; when you start doing this, you would do well to learn about money trading and keep abreast of price movements. How does Forex trading work? Suppose you think that the Euro will increase in value against the Dollar. With 100 euros you could normally make a few cents profit (these shifts are only very small) if you are right. So no fat. But brokers make it possible to profit much more. They will give you (because the shifts are so small) 200 x the amount of dollars you bet. In the end you only pay the difference. Were you right and the Euro is indeed rising? Then you get a multiple of your 100 euros back. Were you wrong? Then you lose a maximum of 100 Euro on your account. The system will sell your position again if you can no longer pay it. How, where and when is it traded? All trading takes place exclusively digitally. Trading is conducted 24 hours a day from approximately 11pm on Sunday evening (at the opening of the Sydney Stock Exchange) to approximately 11pm Friday evening (After New York trading closes). Most sales, however, are made during the overlap of the London and New York sessions: from about 2 pm to about 6 pm our time. That is the best time to trade because that is when there are the most fluctuations. Majors and Currency Pairs The currencies that are traded the most are referred to as 'majors'. These majors are responsible for over 85% of the daily trades in the Forex market. There are seven majors: USD – US Dollar AUD – Australian Dollar GBP – British Pound CAD – Canadian Dollar EUR – Euro JPY – Japanese Yen CHF – Swiss Franc Foreign exchange trading always takes place in pairs. The first currency is the 'base currency' (or 'base currency') and the second currency the 'counter currency' (also known as 'counter' or 'quote'). For example, the rate at which GBP/USD is trading reflects the number of US dollars that can be bought with one pound. There are six major currency pairs: AUD/USD, EUR/USD, GBP/USD, USD/CAD, USD/CHF and USD/JPY. Spread Currency trading has a bid and an ask price. The bid price is the price at which a particular currency can be sold, while the ask price (also called 'ask price') is the price at which a particular currency can be bought. The so-called 'spread' is therefore the difference between the bid and ask price. The price movements of a currency pair are shown in so-called 'Pips' (Percentage in Point), where one pip indicates the smallest fluctuation/movement of the price. One PIP represents a price difference of .0001 or .001 depending on the currency pair being traded. Operation Forex An example: If a trader expects the bank and/or America to want to lower the value of the US dollar in relation to the British pound, the trader will let GBP/USD (i.e. ask GBP/offer USD). When the trader expects that US investors' confidence in the UK economy will decline and they will withdraw money from the UK, the trader will bid GBP/USD (i.e. offer GBP/ask USD). Levers When trading Forex it is common to use leverage. The leverage means that the broker actually buys currency pairs for a multiple of the amount that the trader invests. This leverage allows the trader to make a lot of money quickly, but also lose a lot of money quickly. In particular, the ability to trade with high leverage (100:1 or 400:1) makes Forex trading risky, especially for traders with little experience. So be careful with that! Forex Brokers To trade you need a broker. A broker provides access to the Forex market. The broker does the actual buying and selling of the currency that the trader orders. Due to the increased popularity of the Forex market, there is a proliferation of Forex brokers. The downside of this is the proliferation of rogue Forex brokers. In addition to currency trading, many brokers also offer the possibility to trade in, for example, commodities such as gold, silver and oil. Now that many raw materials are becoming increasingly scarce, this can also be an interesting market.