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Foreign exchange is a branch of economics which is enough to scare anyone who is not an economics genius off. Especially when they come from an old school background like philosophy or science (yes, philosophy gets the first mention because it gave birth to all other fields of study – science and economics included). No need to worry, even if you do not understand or know what Forex trading is help is at hand, because everyone should be in on it, no matter who you are. Below is a forex trading guide for dummies.
If you are a beginner to the foreign exchange market you need to understand a few basic things;
What is Forex Trading?
This is one of the fastest and most exciting markets in the world where a lot of money can be made or lost in a matter of seconds or even simultaneously. While currencies can show important trends which can last days, weeks, or even years, the market is always moving making it an accessible and target rich environment for traders who like excitement.
How Does Forex Trading Work?
All that foreign exchange trading is the buying and selling of foreign currencies on the world market in order to make a profit. There are a number of major currency pairs including the Euro (EUR) and Pound from Britain (GBP), the United States dollar (USD) and NewZealand $ (NZD), the Australian $ (AUD) and Japanese Yen (JPY) to name but a few. The Forex market is open 24 hours a day due to the fact that trade does not occur in a fixed location but over the internet and a network of telephone lines meaning that you can trade from anywhere at any time.
Forex Trading – Types of Forex Rates
There are two types of Forex rates – fixed and floating rates. Fixed rates are set by the central bank of a country and is normally decided on against one of the main currencies or a basket of currencies. Central banks buy and sell its own currency in order to keep the currency at the rate which it has decided on. The second type of Forex rate is the one which will affect you as a Forex trader more – floating rates are decided on through supply and demand by the private market. They are often called self correcting rates as any differences in supply and demand will be corrected automatically.