A look at why people Trade Forex

By Victor Eaton

As the information on the financial markets become more widely available, an increasing number of people is interested to invest and learn how to make money trade. A common starting for beginners is the Forex market. Forex means "Change" and refers to the exchange of currencies from one country against another (by example, EUR/USD and USD/JPY (Dollar of the United States against the Japanese Yen) (the Euro against the Dollar of the United States).)

It is important to realize that all currencies are traded in pairs, unlike an action on the stock exchange and that is just in and of itself. The reason is that a currency has value relative to another currency. For example, the USD (dollar) can go upward or downward in value against another currency. You may have lived apart from the Forex market if you have travelled abroad, to exchange your money for the local currency, and then when you came back home and changed your money in dollars that you were given a different amount. The reason for this is the evolution of the value of the US Dollar versus the currency of the country.

So why someone want to trade currencies?

The Forex market offers certain advantages that are not found in other markets. For example, it is open 24 hours per day, 5 days per week (but for most of the weekend). Unlike with the stock market, you can trade currencies whenever you want (except Saturday).

Currency trading also allows the unique design and leverage, which means basically as grand or as small of positions you want, you can trade. Compare that against the stock market where you have to exchange a size large enough to be profitable after commissions (which certainly may be a problem for some people, but if you're a small merchant, or who want to play safe, it may limit what you can do), or futures market where you are forced to a size of minimum margin (as if you trade the ES - the S & P500 futures - you can) not trade below a lot at a time, which means that each tick mark (the smallest possible price movement) will cost you $12.50). With Forex, you can literally as small Trader you want to, so a pip (the smallest possible price movement) will cost you only $0.01. With sizes like that, you can reduce the risk of loss of your money before learn you enough to be profitable.

Of course, these aspects just scratch the surface. There are many more reasons why people are turning to currency markets.

To learn more about Forex trading, please visit the school of financial Trading!