Forex Trading - What Exactly Is It?

Forex trading has been available to retail investors for the last decade, but has really increased in popularity over the last few years only. Essentially, FX trading is the trading of currencies of different countries - for an eventual profit.

If you have ever travelled to a different country outside the UK - you will no doubt have had to exchange your home currency for another. This in effect is Forex Trading. However - trading $3,000 for holiday spending money doesn't really encompass retail FX trading - as we are about to show you.

Here, we are dealing with Forex trading on the 'Spot Forex' market - which is a special, interbank market with rates being quoted at far more attractive rates than those you would expect to find when you walked in to the bank.

So how can you make a profit from Forex? How do you get started with Forex trading? And what should you know about the FX market before you start investing your hard earned cash to try and earn a return?

24 Hour Market, Open 6 Days per Week

The first point of difference between normal equity and commodity markets and the FX markets are the opening hours. If you have traded equities before, you'll know that there are only a certain number of hours that you are able to trade particular markets - whether it be between 8am and 5pm, or perhaps even 12pm to 6pm.

With Forex markets, there are no opening hours and closing hours (except for the weekend obviously). Therefore, Forex can be traded in any time zone, at any time of the day, usually from Monday to Saturday (or Sunday to Friday - depending on where you are).

This is a big advantage over strict opening hours, and allows for a huge amount of flexibility when trading. People here in the UK commonly favour keeping their full time job, and then coming home to trade part time after work.

Small Capital Requirements - High Leverage

If you thought you needed $50,000 to get started in Forex, think again. One of the great things about the FX markets is that you are able to start trading with as little as $100 with some brokers.

We know what you're thinking - $100? How can I make any money by trading just $100? The answer is leverage.

Leverage is a function which is highly utilized in the FX markets. Because of the relative ease at which Forex trades can be opened and closed, brokers often capitalize on the ability of the market to utilize leverage. In this case, even having $100 in your account could mean that you could use up to 100 or 200 times this amount (by borrowing it temporarily off the broker) for each trade.

This means that for a $100 account size, you can effectively trade $10,000 worth of currency.

As evident, Forex trading offers an opportunity to probe the huge potential that the market makes available to earn vast amounts of money. Take a look around our site for more helpful FX trading info.