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How the Forex Market Works
Written by: PaxForex analytics dept - Tuesday, 28 October 2014 0 comments
Forex is short for foreign exchange and it refers to the international currency trading market. This is an over-the-counter market which allows traders to participate in the ever-changing forex trading currency exchange rates. The forex market is basically open 24 hours per day, five days a week. There is no trading activity on the weekends.
The aim in forex is to exchange one currency for another having ascertained that there will be a price change in your favor. In the forex market the exchange rates are always quoted in currency pairs and all currencies are identified by a three letter acronym. So the American dollar is 'USD', the Australian dollar is 'AUD', British pound is 'GBP', the Euro is 'EUR' and so forth. The first currency that is named in a currency pair is called the base currency and the second one is called the counter currency.
Traders can now speculate on the fluctuating values of currencies between two countries. This seems like something that most people would find easy except in this particular industry there is a
high rate of failure among new traders. Even traders that are aware of that tend to start out with the attitude of "It happened to them, but it won't happen to me". More than 95% of these traders walk away empty handed not quite sure what happened to them.
The number one thing that hangs most traders out to dry is the ability to use forex trading leverage. Using leverage allows traders to trade on the market with more money than what they actually have in their account. For example, if you were trading 2:1 you could use a $1000 deposit to control $2000 of currency on the market. Trading with leverage sounds really good and it's true that it can increase how easily you can make money, but it’s also increases your risk for losses.
Earning in the forex market is an achievable goal if you get educated and keep your head together while you're learning. Accept losses and learn how to move on from them when they happen. People fail at forex trading every day for lack of ability to be honest with them; if you learn to do that you've solved half of the equation for success in forex trading.