Academy of Financial Trading Online

Trading in Forex

With over $4 trillion traded daily, currency trading is by far the biggest and most liquid market in the world. The majority of currencies traded are the majors, namely, U.S. Dollar, Euro, Japanese Yen, British Pound, Swiss Franc, Canadian Dollar, Australian Dollar and New Zealand Dollar. Currencies are traded in pairs with by far the most traded pair being the Euro Dollar (EUR/USD). The currency pair tells the reader how many U.S. dollars (the quote currency) are needed to purchase one euro (the base currency).

Forex or currency trading is extremely popular due to a number of reasons but the main ones being:

  • Liquidity - As the market is so massive you should not ever be requoted or stuck in a trade. This is important for strategic orders.
  • 24 hour market - As it is traded over the counter, the trader does not need to wait for an opening bell
  • Market Size - No individual player could "corner" the EUR/USD market for instance
  • Leverage - due to the trading volume brokers typically offer the highest leverage opportunities in forex
  • Micro Lot Trading Opportunities - You can trade with as little as USD 10 cents per pip creating low individual capital requirements
  • Freely available online resources to support your trading
Furthermore, unlike commodities, indices and shares, forex is not correlated to bull and bear markets meaning that it presents unique trading opportunities i.e. it is not directly correlated to stock indices or commodities.

The major participants in this decentralized over the counter market include major & minor banks, governments, brokers (ECNs and market makers), hedge funds, large commercial companies and retail traders (including you).

When trading currencies the trader needs to understand that there are a wealth of contributing factors contained in the current market price of a particular instrument including:

  • Monetary and Fiscal Policies of the respective countries or currency zones
  • Economic Indicators / Announcements including non-farm payroll (US), consumer price indices, retail sales, manufacturing output and personal consumption
  • Commodities pricing e.g. weak gold can indicate strong USD
  • World economic developments
  • Financial Markets of respective currency
  • Government bond yields
For each currency pair the above factors relate to each of the currencies traded in the pair. Oftentimes, traders will also speculate against safe haven currencies such as the Swiss Franc (CHF) in order to profit from particular economic uncertainty in a particular region



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Disclaimer: Any opinions, news, research, analysis, prices, or other information contained on this website or any other material provide by the Academy of Financial Trading and associated companies or employees is provided as general market commentary, and does not constitute investment advice or a solicitation to buy or sell any foreign exchange contract, contract for difference or securities of any type - It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general information provided here by The Academy of Financial Trading, it's employees, directors or fellow members. Futures, options, and spot currency trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures, foreign exchange and options markets. Don't trade with money you can't afford to lose. This website is neither a solicitation nor an offer to Buy/Sell futures, spot forex, cfd's, options or other financial products. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative of future results. For the avoidance of any doubt, the Academy of Financial Trading and any associated companies, or employees, do not hold themselves out as Commodity Trading Advisors (CTAs). Given this representation, all information and material provided by the Academy of Financial Trading and any associated companies, or employees, is for educational purposes only and should not be considered specific investment advice.

High Risk Warning: Foreign Exchange, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results.