Xelam
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Foreign exchange (FOREX) is the trading of contracts of currency pair exchange rate. It is a NON-DELIVERY trade, which means that there is no physical transaction of currencies, but it is rather an agreement, or "contract" (FOREX DEAL), to trade specific volume of a pair of currencies at an agreed exchange rate. The magnitude of such FOREX trade is that, in order to make the deal, only a proportional amount is needed (the COLLATERAL, or the MARGIN). Thus, if the currency pair exchange rate has changed by some percentage, the value of the MARGIN invested would accordingly change, however - in a much higher proportion. In fact, the actual change onto the Forex trader's investment (the MARGIN they deposited), will be the nominal change occurred to the exchange rate, multiplied by the MARGIN ratio (the leverage).
For example: a FOREX DAY-TRADING deal has been made, for buying EUR100,000 against USD, on an exchange rate of 1.3500. The MARGIN required for this deal (offered by the FOREX Trading Platform) is of a ratio of around 1:100. Accordingly, the trader invests only USD100. After a few hours, the exchange rate went up to 1.3620. This is an increase of 0.89%, quite normal for the global Forex market. However, thanks to the MARGIN ratio (= the LEVERAGE), the trader's investment went up by 89% (since a leverage of 1:100 has been used)!! Remember: that can happen in less than a day, sometimes in hours or even minutes!
Note that the Forex trader may choose the direction of his deal (for example: either to BUY-EUR or to SELL-EUR in a EUR-USD deal), hence may profit (in case he was right ...) when the EUR goes down.
The Forex market offers today FOREX trading not only in MAJORS (the leading world currencies) but also in many other currency pairs (including exotic, gold and silver, etc.).
Register to this site for more information and download a Free Ebook for you to read and understand further how forex really works. |
Shelomo
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Forex is not investing, it is more like gambling. However, it can be profitable, but it is very difficult and takes a long time to master. Anybody who rushes in will lose all their money very quickly. The site below provides a down to earth perspective... |
Tom W
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Its about trading......
Perhaps the best way to find out is to try it, but dont invest money, go to a website like easy forex (below) register and once you've done so open a demo account which doesnt involve money!
You could register for an account here:
http://www.easy-forex-uk.com/ |
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