Trading forex online, it’s a market that's been growing exponentially for the last 10 years, as technology gets better and investors' interest grows.
With more than 2 trillion dollars moving through the market every day, forex is hands-down the biggest market in human history.
Before diving in to forex, it's important to understand how transactions are made in this market. If you don't fully understand the ins and outs of forex before putting your money in the market you are likely to lose your money in a matter of minutes. The market is one of the fastest moving ones in the world — that's how it's able to move 2 trillion in volume every single day!
The first thing you will need to know about trading forex online is the concept for currency pairs. A currency pair is the value of one currency against another. The value of the Canadian dollar relative to the value of the Japanese yen, for example. Another way to think of it is how much yen you could 'buy' with one Canadian dollar. Fluctuations in the value of these two currencies can swing wildly and even unpredictably from day to day, hour to hour, or even second to second.
How money is made is that if there is a trend in the market and you think you know where the market is headed, you buy a lot of Japanese yen with Canadian dollars when their value is low and then sell them when they rise, you can walk away with a tidy profit.
The currency trader is free to play the market with any currency pairing, but there are six currencies that are known as the majors. These 'majors' are usually traded against the US dollar. They are: the euro, the British pound, the Canadian dollar, the Japanese yen, the Swiss franc and the Australian dollar.
You are free to trade in dozens of other currencies, and in trading forex online, there are veteran investors who say that getting away from the majors and trading in less common currencies is where the real money is made.
The value of one currency against another is usually quoted at the bid-ask price. The bid price — which is always lower than the ask price — is the price that the forex broker is willing to buy. It's also the price at which the trader should sell. The ask price, on the other hand, is the price at which the forex broker is ready and willing to sell, meaning the trader should buy it at that price.
These are just the very basic, bare-bones fundamentals of the market, and they're not even all of them. So before you start trading forex online, make sure you do your homework.