|
Forex Traders Profit
The ability to trade in FOREX was once an activity exclusive only to banks and the mega-rich. Participants include: Banks, Commercial companies, Central banks, Investment management firms, Hedge funds and retail Forex brokers. The main trading centres are London, New York, Tokyo, Hong Kong and Singapore, but banks throughout the world participate.
Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session starts, followed by the North American session and then back to Asia, excluding weekends.
The most popular pairs, with their market %, are: USD/EUR (27%), USD/JPY (13%), USD/GBP (12%), USD/AUD (6%), and USD/SF (5%). Although trading in the EURO has considerably increased since the currency's creation in January 1999, the foreign exchange market is still dominated by the USD.
I remember buying New Zealand Dollars for a holiday and two months later checking the exchange rate and realising if I'd bought more I could have used less British Pounds and saved some money.
In other words...a profit! Continued below
|
|
In another business I would reserve Dutch Guilders to pay for Land Rovers coming back in from Holland to the UK. Because of this purchase I would make an extra profit. The light bulb moment didn't happen for years!!
So, without realising it, in a way, I was trading FOREX.
The word FOREX comes from "Foreign" and "Exchange" and other terms include "Spot FX" and "FX."
Owning shares to make money means either dividends paid out or an increase in the share value to receive any gain.
Making money and trading FOREX can be with a rising or falling market.
The trading risk increases because of leverage but, personally, I prefer Spread Betting with a strict bank limit of 5% per trade.
Daily trading, at the time of writing, is about 3.2 trillion USD per day.
Pause on that figure for a moment...One trillion is this: 1,000,000,000,000. So 3.2 trillion is...a lot!
Some large corporations can earn more from their Forex trading than their "core" business. To put it another way...some of their "core" business continues only because of their Forex trading.
That's exactly what was happening with my previously mentioned Land Rover business. If I didn’t buy the Dutch Guilders for a certain amount of British Pounds I could not make a profit.
Forex trading is simply trading in any given pair of currencies, which have sufficient volatility, to enable profit taking due to fluctuations in their exchange rates.
Although exchange rates are affected by many factors, in the end, currency prices are a result of supply and demand forces.
Supply and demand for any given currency, and therefore, its value, are not influenced by any single factor, but by several. These generally fall into three categories: economic factors, political conditions and market psychology. More can be read here.
|