What is Forex?
If you've ever traveled to another country, you usually had to find a currency exchange booth at the airport, and then exchange the money you have in your wallet (if you're a dude) or purse (if you're a lady) or man purse (if you're a metrosexual) into the currency of the country you are visiting.You go up to the counter and notice a screen displaying different exchange rates for different currencies. You find "Japanese yen" and think to yourself, "WOW! My one dollar is worth 100 yen?! And I have ten dollars! I'm going to be rich!!!" (This excitement is quickly killed when you stop by a shop in the airport afterwards to buy a can of soda and, all of a sudden, half your money is gone.)
When you do this, you've essentially participated in the forex market! You've exchanged one currency for another. Or in forex trading terms, assuming you're an American visiting Japan, you've sold dollars and bought yen.
Before you fly back home, you stop by the currency exchange booth to exchange the yen that you miraculously have left over (Tokyo is expensive!) and notice the exchange rates have changed. It's these changes in the exchanges rates that allow you to make money in the foreign exchange market.
The foreign exchange market, which is usually known as "forex" or "FX," is the largest financial market in the world. Compared to the measly $74 billion a day volume of the New York Stock Exchange, the foreign exchange market looks absolutely ginormous with its $4 TRILLION a day trade volume. Forex rocks our socks!
Let's take a moment to put this into perspective using monsters...
The largest stock market in the world, the New York Stock Exchange (NYSE), trades a volume of about $74 billion each day. If we used a monster to represent NYSE, it would look like this...
You hear about the NYSE in the news every day... on CNBC... on Bloomberg...on BBC... heck, you even probably hear about it at your local gym. "The NYSE is up today, blah, blah". When people talk about the "market", they usually mean the stock market. So the NYSE sounds big, it's loud and likes to make a lot of noise.
But if you actually compare it to the foreign exchange market, it would look like this...
Oooh, the NYSE looks so puny compared to forex! It doesn't stand a chance!
The currency market is over 53 times BIGGER! It is HUGE! But hold your horses, there's a catch!
That huge $4 trillion number covers the entire global foreign exchange market, BUT retail traders (that's us) trade the spot market and that's about $1.49 trillion.
So now you know not to be fooled when you read how the stock market is the biggest game out there. It's definitely huge, but not as huge as the media would like you to believe. (Source: www.babypips.com/school)
What is Forex (Foreign Exchange)
The vast currency market is a foreign concept to the average individual. However, once it is broken down into simple terms, the average individual can begin to understand the foreign exchange market and use it as a financial instrument for future investing.
Forex was created not by design, but because traders, brokers, bankers, importers, exporters and investors recognized opportunities it brings. In 1971, the U.S. went off the "gold standard", in which its foreign-exchange rate was pegged to the price of gold. At that moment, new trading opportunities appeared on the horizon.
Forex is the one stabilizing factor in the world's system of monetary exchange, yet it is not answerable to any extrinsic stabilizing influence. There are "no restrictions" in this market. No single international authority acts as a governing body, and no government can intervene unilaterally to regulate foreign exchange practices or, should there be a threat of world monetary crisis, halt trading. While treasury officials in Washington, London, Bonn, Tokyo and other capitals pay close attention to relative currency values, none can intervene in a regulatory capacity. The market exists only to the extent those traders in Asia (Tokyo, Hong Kong and Singapore), Europe (Frankfurt, London, Paris and Geneva), Bahrain, and the U.S. (New York), New Zealand and Australia (Sydney) are willing to buy and sell.
Foreign Exchange is the simultaneous buying of one currency and selling of another. The foreign exchange market (FOREX) is the largest financial market in the world, with a volume of over $1.5 trillion daily. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.
Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the Forex market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets. (source:Relax Investment)
What is a Managed Forex Account.
The vast currency market is a foreign concept to the average individual. However, once it is broken down into simple terms, the average individual can begin to understand the foreign exchange market and use it as a financial instrument for future investing.
Forex was created not by design, but because traders, brokers, bankers, importers, exporters and investors recognized opportunities it brings. In 1971, the U.S. went off the "gold standard", in which its foreign-exchange rate was pegged to the price of gold. At that moment, new trading opportunities appeared on the horizon.
Forex is the one stabilizing factor in the world's system of monetary exchange, yet it is not answerable to any extrinsic stabilizing influence. There are "no restrictions" in this market. No single international authority acts as a governing body, and no government can intervene unilaterally to regulate foreign exchange practices or, should there be a threat of world monetary crisis, halt trading. While treasury officials in Washington, London, Bonn, Tokyo and other capitals pay close attention to relative currency values, none can intervene in a regulatory capacity. The market exists only to the extent those traders in Asia (Tokyo, Hong Kong and Singapore), Europe (Frankfurt, London, Paris and Geneva), Bahrain, and the U.S. (New York), New Zealand and Australia (Sydney) are willing to buy and sell.
Foreign Exchange is the simultaneous buying of one currency and selling of another. The foreign exchange market (FOREX) is the largest financial market in the world, with a volume of over $1.5 trillion daily. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.
Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the Forex market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets. (source:Relax Investment)
What is a Managed Forex Account.
Many people are drawn to the Forex market due to high liquidity, 24 hour trading, low startup costs, and a number of other attractive reasons. However, some traders are unable to sufficiently learn or trade currency due to a conflicting full time job or other obligation. Also, many investors like to supplement their existing portfolio without having to learn a completely new market. This is where the "managed Forex account" comes in. A managed Forex account is an established live Forex account funded by the investor, and traded by a company or professional. This allows the investor a reasonable rate of return on an account he does not necessarily have to trade himself, and the opportunity to be a part of the largest market in the world.
There are obviously many up sides to a managed Forex account. The investor is able to achieve a steady rate of growth without having to spend all the necessary time and effort to trade the money himself. The Forex market is a very liquid market as well, giving the investor a much more flexible means of withdrawing funds from the managed Forex account. Also, trading currency allows profit potential in both rising and falling markets, giving the experienced money manager more opportunities to grow the investor's account.
Two of the major types of managed Forex accounts are those traded manually, and those traded by an automated trading software. Automated trading software automatically trades currency based on a hard coded set of rules. A coder will write the system and money management rules into a variety of programming languages to produce software that could provide a more regulated steady rate of return for the managed Forex account than the manual trader. This gives the ability of the company or professional to advertise a set rate of monthly (or yearly) growth.
As a managed Forex account seems like a very lucrative direction to take in the Forex market, some people may still be drawn away from it for a few select reasons. Usually, many commercial brokers and investment companies have a minimum for the account to be traded. These minimums are usually around $10,000, and prove a hefty starting cost to the average trader. Also, many of these companies can (and usually do) promise high returns. In spite of these statements, the majority charge a monthly management fee to your managed Forex account. If your monthly return is less than the standard monthly charge, your managed Forex account will be in the negative even though before the fee, you were positive.
Unlike other companies, the managed Forex accounts with Relax-Invest have no monthly charges for account management and no hidden fees. The minimum amount for investing on the managed Forex account with Relax-Invest is as low as 50 USD.
Managed Forex accounts can be an excellent way to grow a large account, or provide a steady rate of growth over a long period of time without the hassles and emotional swings of trading currency yourself. If the investor has both the capital and a reputable investment firm or professional, a managed Forex account could prove to be a great investment opportunity. (source: Relax Investment)
Example of Forex Trade
Example of Forex Trade
For example, the current bid-ask price for EUR/USD is 1.5775/1.5781 meaning you can buy 1 Euro for 1.5781 dollars. Suppose you see the trend of Euro growing against dollar and feel Euro is undervalued. To execute this strategy you would buy Euros (simultaneously selling Dollars) and then wait for the exchange rate to rise.
So you purchase 100 000 Euro (1 lot is Forex = 100 000) selling 157810 dollars. As you expected the EUR/USD rises to 1.5882/1.5888. Since you bought Euros and sold Dollars in your previous trade you must now sell Euros for Dollars to realize the profit. You can now sell 1 Euro for 1.5882 Dollars. When you sell the 100 000 Euros at the current rate you will receive 158820 USD.
Since you originally sold (paid) 157810 USD (158820-157810), your profit is 1010 USD. Your total profit = 1010 USD.
However, if the price falls down to the same amount of 0.0101 (as was the increase from the example above: 1.5882-1.5781=0.0101) or 101 pips (a 'pip' in Forex trading is the smallest tick in the price of a currency). You can lose 1010 dollars from the transaction.
So you purchase 100 000 Euro (1 lot is Forex = 100 000) selling 157810 dollars. As you expected the EUR/USD rises to 1.5882/1.5888. Since you bought Euros and sold Dollars in your previous trade you must now sell Euros for Dollars to realize the profit. You can now sell 1 Euro for 1.5882 Dollars. When you sell the 100 000 Euros at the current rate you will receive 158820 USD.
Since you originally sold (paid) 157810 USD (158820-157810), your profit is 1010 USD. Your total profit = 1010 USD.
However, if the price falls down to the same amount of 0.0101 (as was the increase from the example above: 1.5882-1.5781=0.0101) or 101 pips (a 'pip' in Forex trading is the smallest tick in the price of a currency). You can lose 1010 dollars from the transaction.
(source: Relax Investments)
