What is Foreign Exchange and why do you need to know more about it?

It sometimes feels like we are immersed in complicated economics and the tendency is to sit back whilst those in the know dominate the markets and decide what’s best for us. The financial markets have come under close scrutiny in the last few years due to the banking crisis and the ensuing global recession. This has led to increased awareness of the various markets and one market that has been growing significantly in recent times is that of foreign exchange, or rather, Forex.

To initially simplify the case, the forex market is fairly self-explanatory. It involves trading two currencies against each other and profiting on any favourable fluctuations. The depth to which a private speculator wishes to get involved in this market can vary greatly.

The internet has made the market highly accessible and the amount of online forex resources means the private investor can gain a decent education and make money in the right conditions. No longer is the market solely dominated by the larger institutions although they still play the major part.  Online forex trading has boosted access to a broad section of private individuals looking to make money.

There are many players in the forex market, large and small. Banks speculate endlessly and constitute more than 50% of all transactions; globalised businesses exchange currencies in multinational transactions; Governments can meddle with the money supply recently exemplified in the UK through quantitative easing; hedge funds speculate aggressively; and perhaps the Bureau de Change has been most central to the layman’s understanding of foreign exchange until the recent arrival of online forex.

Currencies are traded in pairs and the objective is for to buy low and sell high. Popular pairs can range from EUR/GBP to USD/JPY and generally most other countries with floating exchange rates.

To make the best decisions on which pairs to trade we must be informed of as much market data as we can, available through the multitude of online forex sites.