Forex Trading: A Beginner's Guide to Entering the Forex Market

LONDON, March 29, 2012 /PRNewswire/ --

Forex trading as a beginner can be a daunting process, however, this easy-to-follow guide will help you to understand the basics of trading forex; what it is; how it works; and why so many traders - new and experienced - choose to trade it.

You may have heard of 'foreign exchange', 'retail forex', 'spot forex' or even the simplest version, 'FX'; whilst this market may have many names, it is still one of the same; with an average daily turnover in excess of US$4 trillion - which when compared to the New York Stock Exchange and their US$50 billion (approximately) daily turnover, you can start to understand the sheer magnitude of the forex market.

As I mentioned above, forex trading - in particular as beginner - can be daunting, not being helped by my talk of it being a market of sheer magnitude. But do not give up, stay with me and let me explain as to exactly why it is so big.

A turnover of that size is a result of it being popular; the most popular to be exact.

24-Hour Market

Traders choosing forex can trade on the future price movements of currencies, 24-hours a day through a global network of businesses, banks and individuals.

Currency prices constantly fluctuate as you are trading on the price movements of a global network, providing us, the forex traders, with multiple trading opportunities from Sunday night, opening in Wellington, New Zealand progressing to Asia where trading is then spearheaded out of Tokyo and Singapore; where it then moves to London before it closes in New York on Friday night.

Liquidity

The foreign exchange market is the most liquid in the world.

Liquidity is a characteristic of a market based on the level of ease you can buy and sell at, considering the forex market with its high liquidity; its spreads tend to remain tight throughout the day, giving traders the upper hand in the marketplace.

In turn, this allows traders to trade in and out of the market freely, regardless of the time of day.

But do remember, that there is equal potential for significant losses if the market moves against us.

Forex Providers

Talking about spreads and pips, let's look more closely at forex trading provider, City Index.

Established in the UK in 1983, they are leading providers of not only forex but also CFDs (contracts for difference) and spread betting.

If that experience is not enough, they offer some of the most competitive capped variable spreads starting from just 0.8 pips on EUR/USD.

Summary

Trading forex may be daunting, but as you have - hopefully - see from above, it is highly popular with traders due to multiple factors such as 24-hour trading and high liquidity.

Whether trading forex, CFDs or spread bet markets; keep in mind the significant risks involved with trading a leveraged product, putting in place a comprehensive risk management strategy can be imperative to your trading success.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.

We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for details.