ForexMarket

The Foreign Exchange, also referred to as the "FOREX" “FX” or "Spot FX" market is the largest financial market in the world, with a volume over $1.9 trillion a day. If you compare that to the $20 billion a day volume that the New York Stock Exchange trades, you see how giant the Foreign Exchange really is. It's actually more than three times the total amount of the stocks and futures markets combined!
What is traded on the Foreign Exchange? The answer is money. Forex trading is the simultaneous buying of one currency and selling of another. Currencies are traded through a broker or dealer and are traded in pairs.
For example, the Euro Dollar and the US Dollar (EUR/USD) or the British Pound and the Japanese Yen (GBP/JPY).
This kind of trading is often very confusing to people because you are not buying anything physical. Think of buying a currency as buying a share in a particular country. When you buy, say, Japanese Yen, you are in effect buying a share in the Japanese economy, as the price of the currency is a direct reflection of what the market thinks about the current and future health of the country's economy.
In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country's economy compared to the other countries' economies.
Unlike other financial markets like the New York Stock Exchange, the Forex Spot Market has neither a physical location nor a central exchange. The Forex market is considered an Over-the-Counter (OTC) or 'Interbank' market, due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period.
Until the late 1990’s, only the “big guys” could play this game. The initial requirement was that you could trade only if you had about ten to fifty million dollars to start. Forex was originally intended to be used by bankers and large institutions and not by us “little guys”. However, because of the rise of the Internet, online Forex trading firms are now able to offer trading accounts to 'retail' traders like us.

How to Read an FX Quote
Currencies are always quoted in pairs, such as EUR/USD or USD/CAD. The reason they are quoted in pairs is because in every foreign exchange transaction you are simultaneously buying one currency and selling another. Here is an example of a foreign exchange rate of the British Pound versus the U.S. Dollar:
GBP/USD = 1.7500
The currency to the left of the slash ("/") is called the base currency (in this example, the British Pound) and the one on the right is called the quote currency or counter currency (in this example, the U.S. Dollar). When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy one unit of the base currency. In the example above, you have to pay 1.7500 U.S. Dollars to buy 1 British Pound. The base currency is the “basis” for the buy or the sell. If you buy EUR/USD this simply means that you are buying the base currency and simultaneously selling the quote currency. You would buy the pair if you believe the base currency will appreciate relative to the quote currency. You would sell the pair if you think the base currency will depreciate relative to the quote currency.

Long/Short
First, you should determine whether you want to buy or sell.
If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price. In trader's talk, this is called "going long" or taking a "long position". Just remember: long = buy.
If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price. This is called "going short" or taking a "short position". Short = sell.

Bid/Ask Spread
All Forex quotes include a two-way price, the bid and ask. The bid is always lower than the ask price.
The bid is the price in which the dealer is willing to buy the base currency in exchange for the quote currency.
This means the bid is the price in which you the trader will sell. The ask is the price at which the dealer will sell the base currency in exchange for the quote currency. This means the ask is the price in which you the trader will buy.
The difference between the bid and the ask price is popularly known as the spread.
Let's take a look at an example taken from a trading platform:
On this EUR/USD quote, the bid price is 1.3214 and the ask price is 1.3217 Look at how this broker makes it so easy for you to trade away your money.
If you want to sell EUR, you click "Sell" and you will sell Euros at 1.3214. If you want to buy EUR, you click "Buy" and you will buy Euros at 1.3217

RANGES
Traders use two basic types of analysis to decide on entering a trade- Fundamental and Technical analysis: The Fundamental, in it's basic form deals with News events that can alter or move the Market (the price in currencies).
The Technical, in it's basic form deals with the Trend of the Market. Using these analysis a professional trader looks for the High and Low price of the day in a particular currency pair to pre-determine where

the next move of that pair will be. There is a lot of material to write about the theory of the ranges but it is far beyond the scope of this article, this note is only to make you aware of the reason why some brokers will have the low and high of the pairs on the trade order window, in the example above you can see that the low for the day one the EUR/USD is 1.3191 and high is 1.3268 an expert looking at this may determine that the EUR/USD will be visiting the high for the day once again and will enter a trade going Long(Buy) at 1.3217 hoping that it would reach 1.3268, thus taking an earning of about 48 Pips, if the pips entered in the trades equal$10.00 each than the trader would earn $480.00 on this trade if the trade in fact reached the high of the day as the trader had predicted.

BUT, WHAT IS A PIP?
The most common increment of currencies is the Pip. If the EUR/USD moves from 1.3217 to 1.3218, that is ONE PIP. A pip is the last decimal place of a quotation. The Pip is how you measure your profit or loss.
As each currency has its own value, it is necessary to calculate the value of a pip for that particular currency, Brokers give you this calculation and is displayed on the trading platform, all you need to keep in mind is the following: In currency pairs where the US Dollar is the base currency the pip value varies; in currency pairs where the US Dollar is the quote, the value is fixed. Depending on what type of a trading account you have the value of a Pip will be determined as follows: In a Mini Account the Pip value will be $1.00 (where the US Dollar is the quote currency) and in a Standard Account the Pip value will be $10.00(where the US Dollar is the quote currency) When entering a trade you will be ask to enter the number of lots for a the trade, but..

WHAT IS A LOT?
Spot Forex is traded in lots. The standard size for a lot is $100,000. And the mini lot size is $10,000. As you already know, currencies are measured in pips, which is the smallest increment of that currency. To take advantage of these tiny increments, you need to trade large amounts of a particular currency in order to see any significant profit or loss. When this market first opened to individuals like you and I, the Interbank was faced with the dilemma that most individuals did not have the amount of money required to guarantee their transactions in the spot market, a million dollars to finance a mini account. And so, Brokers came aboard the Market to guarantee trading for individual investors; thus creating the leverage mechanism where an individual investor can control $10,000 with $1.00 Having problems understanding this? Don't be alarmed, just view this as the Broker lends you the total amount needed to trade and you pay no interest or don't have to pay the broker if you lose the trade, if you win the trade you just pay the Spread, and if you lose the trade you only lose the amount you decided to risk before entering the trade, but how do you control risk in the FX Market, by using STOP!

WHAT IS A LIMIT?
A Limit is totally the opposite of a Stop; a Limit is used when a trader enters a trade and he/she believes that the trade will reach a certain level in his or her favor, the trade will hit the Limit and the trader would take profits automatically. Limits are used by traders when they are not going to be by their computers to close the trade
manually. In the case of our example of the EUR/USD you enter the trade at 1.3217, and before you go to bed for the night you enter a Limit 1.3265, experts always use a price a few Pips lower than the high of the day.

How do I start to trade?
First, you have to open an account with a Broker, there are many Brokers, you can go the net and find lots of them pick one and open a Demo Account, this will let you start trading without risking one cent and once you are comfortable trading you can open a Mini Account, all you need is $250.00 and you can begin trading and
earning. With a mini account funded with this amount we recommend you start trading with no more than $1.00 lots, this way if the trade goes against you, the lost will be small. Although it is limited in the side of earnings, if you control the loses the earnings will soon bring your account to the level where you can start to
see the attractive levels associated with this lucrative market.
Much can be said about the Forex Market, it can take pages and then some; talking about hundreds of tactics that have been created by traders all over the world, however as proprietor of ForeXacto you can now begin to analyze the market in a way most traders around the world don't know anything about, if they did trust me they would toss those old tricks out the window. So now that you have a basic knowledge about the Market and its procedures, it is time to begin your journey as a Forex trader, three words of advice practice, practice, practice, until you become and expert in your demo account before entering the real world.
Frequent Asked Questions and Answers