Brian Dolan and Mark Galant have written a great titled Currency Trading for Dummies. This is a book which provides lots of insight on Forex Market abbreviated as “FX market”.
Forex Market is currently the most traded financial market worldwide. The authors called it the “Big Kahuna” of world financial Markets. It’s important to note that all cross-border transactions are handled at the Forex market at some point.
Forex market is quite unique because it is open to the traders six days a week for 24 hours per day.
What are we talking about?
The world of Forex market is huge. It is currently estimated that the market volume exceeds $2 trillion per day. That figure is huge and makes my head dizzy! It has plenty of zeros when written out in full as $2,000,000,000,000. Just to paint the picture, the Forex market is more than 10 times the volume of trading at all stock markets combined.
Speculation
Speculation makes up a huge chunk of forex trading. Traders in the currency market buy and sell to take advantage of the short-term gains. This makes up 90% of all the daily trades.
Volume of Major Currencies Trade
The largest size of Forex trading comprises of major currency trading. This is made up of 75% of total trade volume. The biggest economic regions contributing to the volumes are:
- USD block
- JPY bloc and
- EUR bloc
There are dozens of global financial centers around the world. These are London, Sydney, New York, Tokyo and Sydney.
Currency trading is never interrupted by holidays. It is ongoing.
Main Trading Centers
Below is a list of the main financial trading centers around the world:
- Wellington, New Zealand
- Sydney, Australia
- Tokyo, Japan
- Hong Kong
- Singapore
- London, United Kingdom
How Forex Trading Works
Every currency trade is made up of a simultaneous buy and sell. This is a different approach from the stock market where you either buy or sell at a time.
Secondly, currencies are traded in pairs. For instance, when the price of a dollar rises, it rises against what? If it is against the Euro, then when you sell the USD, you buy the Euro. All currencies have abbreviations and nicknames. These are the names they are given by International Standards Organization (ISO).
Common FX Trading Strategy
In currency trading, the most common trading strategy is to buy low and sell high. This is common just like in stock trading.
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