FOREX: Introduction and Recommendations from professional FX Trader

The word "FOREX" is an English abbreviation of "Foreign Exchange Operations". This kind of business operations constitute a significant part of the global financial market. The circulation of the US stock exchange with the total volume of 300 billion dollars is less than the one of FOREX by three times. According to The Wall Street Journal, only in September, 1992 this volume totalled around 1 trillion dollars per day. The present-day image of FOREX is a direct result of the 1973 events when European countries switched to floating rates of their currencies. This historical event has provided an opportunity to estimate the real value of currencies of the leading world's countries. In other words, demand for currencies was suggested to correct their supply.

It is not difficult to guess what the dominating currencies which constitute the main value of FOREX are. These currencies are serve as a "business card" of their countries, dictating "the rules of the game" to the rest of the world. They are British Pound, Swiss Frank, Japanese Yen, Euro (which has recently substituted German Mark), and, of course, American Dollar. Actually, FOREX is not a market in the traditional meaning of this word. It doesn't have an actual physical location - as opposite to, let's say, currency futures. All trading is conducted by telephone and via computer terminals at the same time all over the world. Another significant difference is based on the fact that this market never closes - it functions 24 hours per day, 7 days per week throghout the entire year. There are always dealers in any of the five time zones (London, New York, Tokyo, Hong Kong, and Sydney), willing to exchage currencies. Another plus of FOREX is the ability to use the concept of marginal trade. For instance, to conduct an operation with US $100,000 all you need to do is to deposit the amount of money equivalent to 1-10% of the contracted amount. This principle is known as "marginal leverage". Nowadays, the most popular marginal leverage among FOREX traders is 1:100.

The cast of FOREX traders is extremely diverse: banks, international corporations, brokerage companies, small firms, and private investors. A huge number and variety of financial institutions allows to choose the most convenient way of conducting operations and to pick the optimal conditions - such as sum of your deposit, minimal transaction amount, marginal leverage, commission etc. In order to realize the forces ruling FOREX, careful attention has to be paid to the countries it was created by and whose currencies are now traded on it. As we have pointed out above, a country's currency plays the role of its "business card" - hence, the actions of countries determine the value of their currencies on FOREX. The key factors of these actions are economy, internal and external politics, and central banks. The high liquidity of FOREX is the aspect which attracts investors to it - however, everyone should keep in mind that the risks being involved are extremely high as well. To make it simple: you can make a fortune out of practically nothing within seconds, but you can also lose your entire deposit in the blink of an eye.

There's no racial or sexual discrimination on stock exchange and currency markets. New York Stock Exchange (NYSE) will always remember Muriel Zaberth - the first woman to obtain her own portal on NYSE who later became a multi-millionaire and funded a large brokerage company in the United States. The main task of any currency trader is the purchase of currencies at low rates and reselling them at higher rates.

Let's say you are purchasing Japanise Yen at the rate of 109.7 to 1,000 US Dollars. The result is multiplied by the value of your marginal leverage (1:100): 109.7*100 = 10,970 Yen. Let's say, after this the rate of USD falls to 109.3 Yens per 1,000 USD (to make it simple: Yen has become more expensive). In order to complete the operation, you re-purchase your initial US $1000 and keep the difference in Yens as your pure profit.

To sum it up: when Yen was cheap, we purchased a certain amount of this currency for USD. As it has grown in price, we re-purchased the initial amount of USD we had spent, and kept the difference in Yens. Such situations occur on FOREX practically every second. To gain some parctical knowledge and practice in this plan, we encourage our clients to open a demo account with one of online dealing centers, and start learning in conditions similar to the ones of FOREX.

But how do we know when and what currency we should purchase and when we should sell it? Your decision should be based on a number of factors. For this purpose, we have invited a member of HyipDiscussion.com under the username "hyi-center.net" to share his knowledge and experience of a professional FOREX trader with our subscribers.