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Learn Forex Basics

As explained in the "What is Forex" article, one of the main characteristics of the Foreign Exchange Market, commonly known as Forex, is the decentralization of players. This means that there is no one body that manages the foreign exchange market, rather a variety of participants that influence its activity.

This Forex Basics article will deal with the main participants in the markets.

Market Participants

Historically the participants in this highly profitable market were central national banks, large multinational corporations and investment funds. Fortunately, with the technological development and a new era of Internet based communications, this arena is now open to a whole new group of Forex investors including commercial and investment banks, online brokers, speculators, businesses and the general public; from an Economy student in Taiwan to a housekeeper in Brazil, anyone with a computer, internet connection and a small amount of money can start trading currencies and become a Forex trader.

Forex Brokers and Market Makers

Brokers serve as agents for retail traders. They receive orders from the traders and execute them.

ECN (Electronic Communications Networks) brokers execute the order against third parties and only serve as a middleman between their customer and the third party, in return to a commission.

Market makers, on the other hand actually play an active part in the transaction by buying and selling the currencies themselves. They will only work with transactions that are profitable for them. So although they don't charge any commission for the transaction, the prices they offer may not be attractive.

Online brokers usually offer their trading services and online platforms with free tools, resources and tutorials. Starting investors can also open a free account to practice and gain access to charts, statistics, technical indicators, economic news and more for free.

Forex Investors & Traders

As we mentioned before, any one can become a foreign exchange trader. With internet brokers offering easy access to the world of currency trading, becoming a trader has never been so easy.

It is important to stress, however, that currency trading requires a learning period, an understanding and discipline. Forex investors need to develop their strategies, experiment with techniques, and retry over and over again in order to gain experience. Investors should also keep an open eye since there are many investment platforms out there promising quick winnings with no effort or preparation at all. In general, professional traders rarely get a return of investment higher than 30% or 40% a year, so if your starting capital is about $100 it is unreal to expect to get rich over night.

Summary

To sum up, the Foreign Exchange Market is the world's largest marketplace and one of the best, more profitable, investment options for intelligent investors around the globe. With the technological and communications development of the last 20 years, it is a market full of potential, open to everyone, whose unprecedented growth has been explosive and unmatched by any other trading market. If you add this to the market's around the clock operations and lack of geographical limits, the foreign exchange market is today's new exciting opportunity for savvy investors and the future of online investments.

It is also a speculative market. So, foreign exchange activity can potentially bring relatively high returns but also substantial loses. That’s why before you decide to participate in it, make sure you are aware of all aspects of foreign exchange trading, including potential loses.

 

 

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