What is FOREX?

As far as the freedom from any external control and free

competition are concerned, FOREX is a perfect market. It is also

 the biggest liquid financial market. According to various assessments,

money masses in the market constitute from 1 to 1.5 trillion US dollars a

day. (It is impossible to determine an absolutely exact number because

 trading is not centralized on an exchange.) Transactions are conducted

 all over the world via telecommunications 24 hours a day from 00:00 GMT

 on Monday to 10:00 pm GMT on Friday. Practically in every time zone

 (that is, in Frankfurt-on-Main, London, New York, Tokyo, Hong Kong, etc.)

 there are dealers who will quote currencies.

FOREX is a more objective market, because if some of its participants would like

 to change prices, for some manipulative purpose, they would have to

operate with tens of billions dollars. That is why any influence by a single

 participants in the market is practically out of the question. The superio

r liquidity allows the traders to open and/or close positions within a few seconds.

The time of keeping a position is arbitrary and has no limits: from several seconds

 to many years. It depends only on your trading strategies. Although the daily

fluctuations of currencies are rather insignificant, you may use the credit lines

, that are accessible even to currency speculators with small capitals ($ 1,000

- 5,000), where the profit may be impressive.

 (You can learn more about it in the section: The main principles of trading.)

The idea of marginal trading stems from the fact that in FOREX speculative interests

 can be satisfied without a real money supply. This decreases overhead

 expenses for transferring money and gives an opportunity to open positions

 with a small account in US dollars, buying and selling a lot of other currencies.

 That is, on can conduct transactions very quickly, getting a big profit, when

the exchange rates

 go up or down. Many speculative transactions in the international financial

markets are made on the principles of marginal trading.

Margin trading is trading with a borrowed capital. Marginal trading in an

 exchange market uses lots. 1 lot equals approximately $100,000, but to

open it it is necessary to have only from 0.5% to 4% of the sum.

For example, you have analyzed the situation in the market and come to

 the conclusion that the pound will go up against the dollar. You open

 1 lot for buying the pound (GBP) with the margin 1% (1:1000 leverage)

 at the price of 1.49889 and wait for the exchange rate to go up. Some

 time later your expectations become true. You close the position at 1.5050

 and earn 61 pips (about $ 405). For the calculation of 1 pip click here.

Everyday fluctuations of currencies constitute about 100 to 150 pips,

 giving FX traders an opportunity to make money on these changes.

In FOREX, it's not obligatory to buy some currency first in order to sell it later.

It's possible to open positions for buying and selling any currency without a

ctually having it. Usually Internet-brokers establish the minimum deposit such as

$ 2000, for working in the FOREX market, and grant a leverage of 1:1

00. That is, opening the position at $100,000, a trader invests $1,000 and r

eceives $99.000 as a credi

t. The major currencies traded in FOREX, are Euro (EUR), Japanese y

en (JPY), British Pound (GBP), and Swiss Franc (CHF). All of them are

 traded against the US dollar (USD).

In order to assess the situation in the market a trader has to be able

to use fundamental and/or technical analysis, as well as to make

decisions in the constantly changing current of information about political a

nd economic characte

r. Most small and medium players in financial markets use technical a

nalysis. Technical analysis presupposes that all the information about

 the market and its further fluctuations is contained in the price chain.

Any factor, that has some influence on the price, be it economic, political o

r psychological, has alre

ady been considered by the market and included in the price. The initial

data for a technical analysis are prices: the highest and the lowest prices, the

 price of opening and clo

sing within a certain period of time, and the volume of transactions.

That is, technical analysis is a statistical and mathematical analysis of

previous quotes and a prognosis of coming prices.

A number of technical indicators have been installed into the

PRO-CHARTS trading system. Analyzing the indicators one can

come to the conclusion about further movements of the quoted currencies.

 For a more detailed de******ion of the indicators, analyzing price charts a

nd volumes of trading, click here.

Fundamental analysis is an analysis of current situations in the c

ountry of the currency, such as its economy, political events, and

 rumors. The country's economy depends on the rate of inflation

and unemployment, on the interest rate of its Central Bank, and o

n tax policy. Political stability also influences the exchange rate. P

olicy of the Central Bank has a special role, as concentrated inter

ventions or refusal from them greatly influence the exchange rate.

At the same time one should not consider fundamental analysis just

 as an analysis of the economic situation in the country itself. A far b

igger role in the FOREX market belongs to the expectations of the

market participants and their assessment of these expectations. Vario

us prognoses and bulletins, i

ssued by the participants, have a strong influence on the expectations

. Very often an effect of the so-c

alled self-filfilling prophecy occurs when market players raise or low

er the exchange rates according to the prognosis. But a deep and th

orough fundamental analysis is available only for big banks with a staf

f of professional analysts and constant access to a wide field of information.

In spite of these different approaches, both forms of analyses comple

ment one another. Traders who act on the basis of a fundamental an

alysis, have to consider some technical characteristics of the market (

the main rates of support, such as resistance and resale), and supp

orters of the technical approach to the market must track the main new

s (interest rates, important political events).

The main merits of the FOREX market are:

• The biggest number of participants and the largest volume
• s of transactions;
• Superior liquidity and speed of the market: transactions
• are conducted within a few seconds according to online quotes;
• The market works 24 hours a day, every working days;
• A trader can open a position for any period of time he wants;
• No fees, except for the difference between buying and selling prices;
• An opportunity to get a bigger profit that the invested sum;
• Qualified work in the FOREX market can become your main professional activity;
• You can make deals any time you like.

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