Introduction to the Forex Market

What is the Forex?
FOREX, stands for the FOReign Currency EXchange, is a market in which currencies are traded.  Specifically, traders in the Forex market are trading one currency against another.

As in some other markets (commodities, for instance), there are several different types of players in the game.  These players buy and sell currencies, trading one against the other.

The players engaging in this kind of Forex market activity are very large banks and corporations as well as countries (the United States, for example, always holds a certain amount of other countries' currency in addition to its U.S. dollars).  There are also options traders in the Forex market, just as there are in the commodities market, for example.

Finally, there are speculative traders, the category into which nearly all individual traders fall.  As a speculative trader, you are not actually buying or selling currencies – you do not have to have $100,000 U.S. dollars in your bank account to give in exchange for $130,000 Euro dollars.  Instead, you are speculating on the value of one currency with respect to another.

You are, essentially, betting on which currencies will increase in value and which will decrease in value – you are betting on the actions of those players who are actually exchanging the currencies.  While understanding the fundamental factors that contribute to the value of a country's currency is important for you, it is not nearly as important as understanding the factors that contribute to the major players' decisions.

It happens to be that they are actively analyzing a country's fundamental factors and buying or selling its currency based on that information – but you don't need to be an economist or a political scientist to be a successful Forex trader – you do need to be able to recognize when the major players are making a move.

The point of this blog is to help you do just that – to help you recognize movements by the major players that will change the value of one currency against another.  If you learn to recognize these movements, you will be able to make sound bets on their effects on the price of a currency.

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