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Each day, millions of trades are made in a currency exchange market called Forex. The word
"Forex" directly stems off of the beginning of two words - "foreign" and "exchange". Unlike other
trading systems such as the stock market, Forex does not involve the trading of any goods,
physical or representative. Instead, Forex operates through buying, selling, and trading between
the currencies of various economies from around the world. Because the Forex market is truly a
global trading system, trades are made 24 hours a day, five days a week. In addition, Forex is not
bound by any one control agency, which means that Forex is the only true free market economic
trading system available today. By leaving the exchange rates out of any one group's hands, it is
much more difficult to even attempt to manipulate or corner the currency market. With all of the
advantages associated with the Forex system, and the global range of participation, the Forex
market is the largest market in the entire world. Anywhere between 1 trillion and 1.5 trillion
equivalent United States dollars are traded on the Forex market each and every day.
Forex operates mainly on the concept of "free-floating" currencies; this can be explained best as
currencies that are not backed by specific materials such as gold or silver. Prior to 1971, a market
such as Forex would not work because of the international "Bretton Woods" agreement. This
agreement stipulated that all involved economies would strive to hold the value of their currencies
close to the value of the US dollar, which in turn was held to the value of gold. In 1971, the Bretton
Woods agreement was abandoned. The United States had run a huge deficit during the Vietnam
Conflict, and began printing out more paper currency than they could back with gold, resulting in a
relatively high level of inflation. By 1976, every major currency worldwide had left the system
established under the Bretton Woods agreement, and had changed into a free-floating system of
currency. This free-floating system meant that each country's currency could have vastly different
values that fluctuated based on how the country's economy was faring at that time.
Because each currency fluctuates independently, it is possible to make a profit from the changes
in currency value. For example, 1 Euro used to be worth about 0.86 US dollars. Shortly thereafter,
1 Euro was worth about 1.08 US dollars. Those who bought Euros at 86 cents and sold them at
1.08 US dollars were able to make 22 cents profit off of each Euro - this could equate to hundreds
of millions in profits for those who were deeply rooted in the Euro. Everything in the Forex market
is hanging on the exchange rate of various currencies. Sadly, very few people realize that the
exchange rates they see on the news and read about in the newspapers each day could possibly
be able to work towards profits on their behalf, even if they were just to make a small investment.
The Euro and the US dollar are probably the two most well-known currencies that are used in the
Forex market, and therefore they are two of the most widely traded in the Forex market. In addition
to the two "kings of currency", there are a few other currencies that have fairly strong reputation for
Forex trading. The Australian Dollar, the Japanese Yen, the Canadian Dollar, and the New
Zealand Dollar are all staple currencies used by established Forex traders. However, it is
important to note that on most Forex services, you won't see the full name of a currency written

2. out. Each currency has it's own symbol, just as companies involved in the stock market have their
own symbol based off of the name of their company. Some of the important currency symbols to
know are:
USD - United States Dollar
EUR - The Euro
CAD - The Canadian Dollar
AUD - The Australian Dollar
JPY - The Japanese Yen
NZD - The New Zealand Dollar
Although the symbols may be confusing at first, you'll get used to them after a while. Remember
that each currency's symbol is logically formed from the name of the currency, usually in some
form of acronym. With a little practice, you'll be able to determine most currency codes without
even having to look them up.
Some of the richest people in the world have Forex as a large part of their investment portfolio.
Warren Buffet, the world's richest man, has over $20 Billion invested in various currencies on the
Forex market. His revenue portfolio usually includes well over one-hundred million dollars in profit
from Forex trades each quartile. George Soros is another big name in the field of currency trading
- it is believed that he made over $1 billion in profit from a single day of trading in 1992! Although
those types of trades are very rare, he was still able to amass over $7 Billion from three decades
of trading on the Forex market. The strategy of George Soros also goes to show that you don't
have to be too risky to make profits on Forex - his conservative strategy involves withdrawing large
portions of his profits from the market, even when the trend of his various investments seems to
still be correlating upward.
Thankfully, you don't have to invest millions of dollars to make a profit on Forex. Many people
have recorded their success with initial investments of anywhere from $10,000 to as little as $100
for an initial investment. This wide range of economic requirements makes Forex an attractive
venue for trading among all classes, from those well entrenched in the lower rungs of the middle
class, all the way up to the richest people alive on the planet. For those on the lower end of the
spectrum, access to the Forex market is a fairly recent innovation. Within the past decades,
various companies began offering a system that is friendlier to the average person, allowing the
smaller initial investments and greater flexibility that is seen in the market today. Now, no matter
what economic position you are in, you can get started. Although it's possible to jump right in and
start investing, it's best that you make sure you have a better understanding of the ins and outs of
Forex trading before you get started.
The world of Forex is one that can be both profitable and exciting, but in order to make Forex work
for you it is important that you know how the system works. Like most lucrative activities, to
become a Forex pro you need a lot of practice. There are many websites that offer exactly this, the
simulated practice of Foreign Exchange.

3. The services provided by online practice sites differ from site to site, so it is always a good idea to
make sure you know all of the details of the site you are about to use. For example, there are
several online brokers who will offer a practice account for a period of several weeks, then
terminate it and start you on a live account, which means you may end up using your own money
before you are ready to. It's always a good idea to find a site that offers an unlimited practice
account. Having a practice account allows you to learn the ways of the trade with no risk at all.
Continuing to use the practice account while you use a live account is also a beneficial tool for
even the most seasoned Forex traders. The use of a no risk practice account enables you to try
out new trading strategies and tread into unknown waters. If the strategy works, you know that you
can now implement that strategy into your real account. If the strategy fails, you know to refrain
from the use of that strategy without the loss of any actual money.
Of course, simply using a no risk account won't get you anywhere. In order to make money with
Forex, you need to put your own money in. Obviously, it would be ridiculous to travel to other
countries to purchase and sell different currencies, so there are many websites that you can use to
digitally trade your money. Almost all online brokerage systems have different features to offer you
so you have to do the research to find out which site you wish to create an account with.
All brokers will require specific information of you to create your account. The information they will
need from you includes information required to communicate with you, including your name,
mailing address, telephone number, e-mail address. They also require information needed to
identify who you are, including your Social Security number, Passport number or Tax Identification
number. It is required by law that they have this information, so they can prevent fraudulent
trading. They may also collect various personal information when you open an account, including
gender, birth date, occupation, and employment status.
Now that you have practiced trading currency and set up your live account, it is time to truly enter
this profitable yet risky world. To make money with Forex, you do need to have money to begin
with. It is possible to trade with very small amounts of money, but this will also lead to very small
profits. As is with many other exchange systems, high payouts will only come with high risks. You
can't expect to start getting millions as soon as you put money in to the market, but you can't
expect to make any money at all if you don't put in at least a 3-digit value.
As most Forex brokers will warn you, you can loose money in the foreign exchange market, so
don't put your life savings into any one trade. Always trade with money that you'd be able to
survive without. This will ensure that if you get a bad trade and loose a lot of money, you wont end
up on the streets, and you'll be able to make a comeback in the future.
So how does trading currency work? Logically, trades always come in pairs. For example, a
common trade would be the United States Dollar to the Japanese Yen. This is expressed as
USD/JPY. The way to quote a trade is kind of tricky, but with practice it becomes as natural as
reading your native language. In a Forex quote, the first currency in the list (IE: USD in USD/JPY)
is the base currency, and in the quote the base is always one. This means if (hypothetically of
course) One USD was worth Two JPY, that the quote would be expressed as 1/2.
When trading in Forex, we use pips. Pip is an acronym for "percentage in point". A pip a certain
decimal place in a number compared to the same decimal place in another number. Using pips,
we track the gains and losses of a currencies value compared to another's. Let's take a look at an

4. example. Say a value is written as 1.0001/1.0004. This would indicate a 3-pip spread, because of
the 3 number difference in the fourth decimal place. Almost all currency pairs go to the fourth
decimal place. The only currency pair that doesn't is that of the USD/JPY, and it goes to the
second decimal place. For example, a USD/JPY quote with a 3-point spread would look like this:
1.01/1.04.
A very common aspect to the foreign exchange is leverage. Leverage trading, also known as
trading on margin, is a way to amplify the amount of money you are making. When you use
leverage trading, you borrow a certain amount of money from your broker and use that to make
your transaction. This allows you to trade with more money then you are actually spending,
meaning you can make higher profits than you would normally be able to make.
There are risks associated with leverage trading. If you increase the amount of money you are
using, if a trade goes bad, then you'll loose more money than you'd usually loose. The risks are
worth it though, because a big win on margin means a huge payout. As mentioned before, it is
definitely a wise idea to try out leverage trading on your practice account before you use it
excessively on your live account, so you can get a feel for the way it works.
Now that you're an expert on the way Forex trading works there are some things about foreign
exchange that you should know. Forex is just like the stock market in that there are many benefits
and risks, but if you are going to invest your time and personal money into this system, you should
be fully aware of all of the factors that may change your decision to invest in the currency market.
Generally speaking, Forex is a difficult subject to opinionate on, because of the different factors
that may alter the currency over the years. "Supply and demand" is a major issue affecting the
Forex organization, because the world is in constant variable to change, one significant product
being oil. Usually the currency of all the nations around the globe is described as a huge "melting
pot", because of the fact that all of the interchanging controversy, political affairs, national
disputes, and possibly war conflicts, all mixed together as a whole, altering the nature of Forex
every second! Although problems such as supply and demand, and the whole "melting pot" issue,
there are a numerous amount of pros to Forex; one being benefited profit from long term stock.
Because of the positive aspects of Forex, the percentage of the use of electronic trading in the FX
market (shortened from Foreign Exchange) increased by 7% from 2005 to 2008. Despite the
controversial realm of Forex, it is still recognized today by many, and is still popular amongst many
of the nations in the world.
Of all the organizations that recognize Forex, most of them practice fiscal policy, and monetary
policy. Both policies are dependent on the nation's outlook on economics, and their standards set.
The government's budget deficits, or surpluses against the country, is widely affected by the
country's economic status of trade, and may critically inflict the nation's currency. Another factor
for the nation's deficit spending is what the nation already has, in terms of necessities for the
citizens, and the society. The more the country already has, prior to trade, the greater the budget
for other demands from the people, such as technology, innovations in existing products, etc.
Although a country may have an abundance in necessities, greed may hinder the nation's
economic status, by changing government official's wants, to want "unnecessary" products,
therefore ruining or "wasting" the country's money. This negative trend may lead to the country's
doom, and hurt the Forex's reputation for positive change. There are some countries which hold
more of a product (such as oil stated above), the Middle East dominating that sector in the circle of

5. trade; Since the Middle East suffers much poverty, as a result of deficit spending, and lack of other
resources, they demand for a higher price in oil, to maintain their economic status. This process is
known as the "flights to quality", and is practiced by many countries, wanting to survive in the
trading network that exists today. Interest rate, and leveraged financing, is due to the inflations that
occur in many parts of the world from one point to another. Inflations wear down purchasing
abilities, causing the currency to fall with it. In some cases, a country may observe the trends that
it takes, and beforehand, take action to avoid any mishaps that had been experienced before.
Sometimes, the country will buy more of a product, or sell more of a product, otherwise known as
"overbought" or "oversold". This may aid in the country's future, or devastatingly hurt the country,
because of lack of thought, as a result of fraud logic.
"What started out as a market for professionals is now attracting traders from all over the world
and of all experience levels" is part of a letter of the chairman of Forex, and it is completely true.
There is even a 30-day trial for Forex online at http://www.forex.com/forex_demo_account.html if
anyone interested in Forex wants to learn more about the company. Although affected by
leveraged financing, interest rate, and causing an increase or decrease in exchange rate risks,
Forex can be a great way for quick profits and integrated economy for the country. In investing in
stocks that are most likely to be successful for a long period of time, and researching these
companies for more reference and background that you need to know, Forex can aid in these
fields. In the Forex market of different levels of access, the inter-bank market composed of the
largest investment bank firm, which contains "spreads", which are divided into bid, and ask prices.
Large amounts of transactions, with large amounts traded, and requesting a small amount of
difference is known as a better spread, which is preferred by many investors.
In comparison to the Stock Market, the Forex organization is just as stable, and safe, if the users
on it are aware, and decently knowledgeable about the topic. The Stock Market Crash in 1929 was
a result of lack of thinking, because of the extremely cheap shares, replacing the shares originally
costing thousands of dollars. When the Stock Market crashed, and the New Deal was proposed by
Franklin D. Roosevelt, leveraged finance was present, and utilized to stabilize the economy at the
time. The United States was extremely wealthy and prosperous in the 20s (prior to the
depression), and had not realized what could happen as a result of carelessness in spending. This
is a result of deficit spending, and how it could damage a society, in less than a decade! When
joining Forex, keep in mind that with the possible positive outcomes, and negative ones, there are
obstacles that must be faced to become successful.
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