Major World Currencies
The most traded currencies are United States Dollar, Euro, Japanese Yen and British Pound. Forex Trading is one of the best ways to make money in the stock market. Forex means the Foreign Exchange Market, and refers to the buying and selling of different currencies to make a profit. This is one of the only markets that is open 24 hours a day on weekdays, because the Forex market begins on Monday morning in Sydney and closes at Friday evening in San Francisco.
By trading different currencies against each other, traders can use the ever changing exchange rates to make profits, by buying and selling at the right times. Most of these trades make little profit by investing themselves, but when the profits from each trade are added up, they can come out to quite a large number.
An example of a Forex trade would be to buy the Euro while selling the United States Dollar at the same time. This trade would be referred to as "going long on the EUR/USD market". Then, depending on the exchange rate of the Euro against the US Dollar, the trader will end up making a profit or a loss on their transaction.
The key for most traders is to wait until their particular trade has reached a sufficient positive value before selling. Most Forex trading is conducted through a broker. These brokers will assist clients in choosing a currency pair that is expected to change value and then making a trade on that currency pair. For example, if a client purchased 10,000 Euros in 2005, that may have cost him or her 12,000 US Dollars. At the end of a year, or two years, the Euros value compared to the US Dollar's value increased, meaning that those 10,000 Euros were then worth around 13,000 or 14,000 US Dollars. By then selling the Euros and buying US Dollars, the client made a 3,000 or 4,000 US Dollar profit on one transaction.
While it can seem like an easy way to make money, it is important to remember that the Forex market is the most unpredictable market in the world. Foreign currencies are always changing values, as any small economic change will have an impact on their value. That is why Forex traders must be alert to these possible changes, and on the lookout to make trades on a minute-by-minute basis. Time is no man's friend, especially not in the Forex market. If you wait too long to make your move, your potential profit could start turning into potential losses.
That being said, a great deal of money is traded on the Forex market. Major United States based investment banks, such as Deutsche Bank and Barclays Capital have a huge market share in the Forex market. A lot of their investments are based on foreign currency changes, showing that there is a huge potential to make money this way. In terms of currencies, the United States Dollar, Euro, Japanese Yen, and United Kingdom Pound Sterling are the four most popular currencies. The United States Dollar has 85% of the market share, meaning it is the most heavily traded currency in the Forex market.
That is not to say that money cannot be made through other currencies. It is all about knowing which way the currency's trend will go and what the right time to buy and sell is. If these factors can be understood, then there is money be made in the Forex market. Although, it is important to remember that while money can be made, it is not easy money and the percentage of profits only reaches high levels if long term investments are made. A trader cannot expect to make 10 or 15 percent profits in a couple of weeks. But, such profits can be seen in a couple of months, and that is not the case in most other aspects of the Stock Exchange, especially in this economy.
Another great aspect of the Forex market is that money can be made no matter what the economic climate. Even in a recession, currencies are traded and their values continue to change for better or worse. That means profits can be made all the time, in a bulls or bears market, in a recession or an economic boom. As long as your trader is experienced and hands out the right advice, there is no reason why you should not be seeing profits on your currency trades within the near future.
Professional advice should be sought regarding all financial services. These can be obtained from financial advisors and planners who can also advise on loans, accountancy and tax related matters.