FX basics

Welcome to the ultimate Fxstrategy Forex training program where our aim is to help you trade fx profitably.

In order to trade FX profitably, you need to first understand the basic mechanics of the forex markets.

The word ‘Forex’ (fx) stands for ‘foreign exchange’ and is an interbank market where currencies are bought and sold against each other. It is named foreign exchange because the exchanging of one currency for another currency takes place.

If you want to ‘buy’ for example U.S. Dollars you need to exchange them for another currency which means that you simultaneously sell a currency that you have in your pocket.

A great analogy would be if you live in Australia and buy something on the internet that is quoted in USD, then you buy the US Dollar with your Australian dollars in order to pay for the goods or services that you acquired. Usually your credit card company performs that transaction automatically.

Because 2 currencies are always involved in foreign exchange trading, currencies are traded in the form of currency pairs, with the pricing based on the exchange rate offered by dealers in the forex market.

The main market participants are Governments, Central Banks, Commercials and Investment Banks, Hedge Funds, and Multi-National Corporations.

Even though Forex has been around for a long time it wasn’t until about 1996 that private individuals could trade it. Previously, it took a lot of money to be able to participate and was therefore mainly traded by institutions, such as banks and hedge funds.

By 1998, the internet was increasing in popularity. This led to many brokers opening up online shops thus allowing smaller traders access to the Forex market.

So Forex is a relatively new market to smaller traders, and while it's growing very fast, it is not as well-known as the stock market. However, in our opinion the Forex market has many advantages over the stock market.

With a daily turnover in excess of 4 trillion dollarstoday it is one of the largest financial markets in the world.