October 29, 2010

Understanding 4 Of The Most Basic Yet Necessary Forex Trading Phrases

people believe that trading on the foreign exchange market is either really easy or really complicated. Whilst it tends to lean towards the latter in general, it can be made a lot clearer by fully researching, learning and experiencing how Forex trading works.

If you are new to Forex, it is likely that a lot of the terminology will seem very confusing. These four phrases are some of the most used and understanding these first and foremost should give you a good, basic introduction into the market before starting to learn and understand it in greater detail.

1. Broker. A Forex broker is someone who basically carries out your trading for you. They act as the middle man between the end user and the foreign exchange market and remove all of the complicated processes that most individual Forex traders would not know existed.

Of course, brokers do not work for free and whilst they charge a fee, it is not often in the form of a monthly or annual one, but as part of any trades that you make. This means that you can effectively incorporate this into your statistics and planning, meaning that there are no unwanted or unexpected fees coming out of what you thought was pure profit.

2. Platform. Sometimes called software or programs, a Forex platform is what displays all of the live foreign exchange data. If the broker was the connection between the end user and the market, the platform is the connection between the end user and the broker.

The most popular platform currently is Meta Trader 4 and it is used by a substantial amount of brokers. Not the only platform available to utilize, Meta Trader 4 is considered by many to be the best as it offers a variety of different options, from easy customization to a simple and straightforward user interface.

3. Currency Pairs. These are what traders are actually trading. Rather than simply buying or selling one type of currency, you actually trade in pairs. According to the Bank for International Settlements, there are considered to be 7 popular currencies, with the main currency pairs that are traded being a combination of these 7. For example, USD/EUR, the trading of the United States Dollar and the Euro, is one of the most popular currency pairs, with the USD alone accounting for almost an 87 percent daily share of the market in April 2007, according again to the Bank for International Settlements.

4. Currency Traders. Although it may not seem like it, personal traders on the foreign exchange market actually only make up a relatively small percentage of all of those involved and whilst they are still considered to be currency traders, it is the much larger companies - some of whom you may not be aware traded Forex - that are the main players.

For example, a Euromoney FX survey in May 2009 found that Deutsche Bank was the most active of all currency traders, with a market share of 20.96 percent. Compared to BNP Paribas in tenth place, who had a somewhat mere 2.26 percent in comparison, the extent of Deutsche Bank's dominance in the market is huge and shows just how small of a market share individual traders have.

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