A Brief Overview of Buying and Selling in Forex Trading

You can't read much about the investing world now without hearing about the enormous profit potential of Forex trading and the enormous opportunity it represents for people to supplement income from their jobs and even start working from home without compromising their current lifestyle.

Most experienced traders consider the Forex market to be the most liquid and profitable of the investment markets. For many years, Forex trading was only possible by major banks, large financial institutions and national central banks (institutions with millions and billions of dollars to invest). But now, the market has been opened to everyone willing to learn the nuances of forex trading and traders can even get started with an account as low as $200.

The forex market has five major currencies: the US Dollar, the British Pound, the Japanese Yen, the Euro and the Swiss Franc. These five currencies account for over seventy percent of North American trading. Of course there are other tradeable currencies; they include the Canadian, Australian and New Zealand Dollars. These minor currencies account for only four to seven percent of the total forex market volume, so these are not as popular as the major currency pairs.

You have many advantages when trading the forex market, for example; you don't have to worry about fees you may have to pay to your usual broker; there are also none of the usual fees to which futures, equity and stock traders are used to paying.

The concept of Buying in Forex refers to the buying of a particular currency pair to open a trade, and Selling short refers to the selling of a particular currency to open a trade. When you Buy, you are expecting the price of the currency pair to increase with time, you buy low to sell high. In the case of Selling short, you are expecting a currency pair to lose value in a given period of time and then, once it happens, you buy it back at the new price. Now you can sell it at the previous price the currency had when you opened the trade, so you make profit from the difference in prices. It may seem a little confusing when you are initially starting, but once you place a few demo trades it will become second nature.


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