By: Sara Patterson
If you’re new to the Forex world you may be wondering what it is all about and what actions you will need to perform during a typical Forex trading day. You may also be wondering whether Forex trading is a truly worthwhile endeavor or whether it’s worthwhile to pursue more money and entertainment elsewhere. This article will give you some important background information relating to the Forex industry so that you can determine whether to try it out.
The Forex Trading Day
Unlike localized markets in which trading takes place in specific times zones and according to a specific national calendar Forex trading can be done around the clock, which means that you’ll have ample opportunities to trade in your spare time – whenever that is. The Forex trading day is a full twenty-four hours and the Forex week starts from 5:00 pm Sunday EST and finishes 4:00 pm EST on Friday. As such, you will have the opportunity to design a trading strategy that best complies with your lifestyle.
High Liquidity and Daily Turnover
The Forex market is highly liquid which essentially means that your currency transactions will be supported because there is a large number of other trading participants. The turnover generated each Forex trading day is much larger than those produced by other markets. For example, the stock market has a daily turnover of just $25 million whereas the Forex market conducts about $3 billion in trades daily.
The Importance of Transparency
As the Forex market is completely transparent, you will be able to trade on exactly the same level as big institutions, such as hedge funds and banks. Moreover, because Forex is such a gigantic market, nobody can manipulate its figures. Consequently, you can approach each Forex trading day with the confidence that you will not be subjected to any major sudden adjustments.
Major Currencies
You must also realize that the major currencies that are exchanged during each Forex trading day account for about 85% of its volume. They are the US dollar, Euro, British Pound, Swiss Franc, Canadian dollar, Australian dollar, Japanese Yen and New Zealand Dollar. Nevertheless, you needn’t live in a country with one of these currencies to have a profitable Forex trading experience. Instead, you’ll just need to learn how to monitor these currencies over the course of your Forex trading day.
Relationship with other Markets
Although Forex is independent of all other markets, you will find that it does have relationships with them, which can be an advantage if you’re familiar with other markets. For instance, Forex is strongly correlated to the stock market. For example, if the Dow Jones Index climbs in value, then so will the higher-yielding currencies such as the Euro and the British Pound. In contrast, the currencies exhibiting low yields will fall in value.
Fees and Charges
You will not be charged any fees directly by the Forex market. However, you will accrue costs from spreads and rollover fees, etc. For example, you will either earn or be charged a fee for keeping your positions open from one Forex trading day to the next depending on the comparable interest rates of the currencies involved.
Ready to try it out? Why not open a free demo account to see whether you can enjoy and profit from trading Forex.