Forex is a short word that can refer to a lot of things. On a global scale it has to do with the trading of one kind of currency for another. Every time you you go on a trip out of the country, you’ve got trade your nation’s currency for that of the regional currency. This process is known as “foreign exchange” or, more catchily, Forex. But Forex doesn’t just happen in simple over-the-counter interactions between foreigners, it also happens on a global scale constantly. If one country is selling arms to another, or an importer is buying coffee from Nicaragua, currencies have to be exchanged, money translated from one form to another.
Because individual currencies are gaining and losing value all the time, this means that on any given trade, one member is getting a slightly better deal than the other, as long as the currency value change swings in their favor. In anticipation of currency value changes based on specific international factors, large institutions and even sovereign nations will invest in foreign currencies in order to see a big return. Do you anticipate that the Euro is going to recover from its recent plunge? Buy up a bunch and wait for the price to rise, then sell for a profit in your native market. This form of foreign currency exchange (forex) is known as the spot market, where the buyers and sellers always own the asset that is being traded.
But Forex also has a large futures market, where entities and individuals can speculate about the value, moment to moment, of global currencies relative to one another. By placing bets on how a currency is going to increase or decrease in value, over a specific window of time, Forex investors are a brand of day trader who can gain and lose money in big quantities, very quickly. The odds change depending on the broker and the currency in question. This is called leverage, and the higher the leverage, the more money an investor will win on a successful bet.
Like all speculative investment, Forex trading success is built on knowledge, observation, experience, and luck. Luck is perhaps the most important factor, as there are simply too many global factors to consider, which underly the momentary value of any one currency. But experience is also very important for the Forex trader. By taking advantage of big wins, Forex traders can offset many smaller losses. In this way, the best Forex traders make a lot of profit, even though they may get their bets right less than 50% of the time.
National regulations for Forex trading differ, but you can get there is a Forex trading platform that is right for you. As a beginner, make sure you take advantage of Free options available from many brokers. You’ll be able to make decisions and predictions, just as you would as a real investor, without the risk of losing real money. In this way, you’ll see the rhythm of the market, and you’ll learn the kind of intuitive decisions that make a great Forex trader.