There are several ways to learn forex, the term that stands for foreign exchange. The best is through full-time educational programs that teach the working of forex markets. Another way is through forex books. However, this is a time consuming method, and the individual has to spend hours to dig out relevant information. There is also a practical method. This involves working with a forex brokerage or with a forex trading firm.
Irrespective of which method an individual chooses, it is not easy to learn about forex. The forex market is the largest market in the world where trade is conducted round the clock in real time. There is no centralized trading post, and no centralized governing body. The entire trade is seamless, and works across time zones and across countries.
Ninety-five percent of this trade is speculative in nature, and is carried out by traders who want to make a profit by trading in foreign currency. The remaining five per cent is conducted by countries that use foreign currency to buy or sell products or services.
The most important forex markets are London, New York and Tokyo, and the most traded currencies are the US Dollar, European Euro, Japanese Yen, Swiss Franc and British Pound. These currencies are traded in pairs. For instance, the pair EUR/USD for a purchaser indicates that the trader is buying the Eurocurrency and selling the U.S. Dollar because the trader anticipates that the Euros are likely to gain in value as compared to US dollars.
The trader may end up making a profit if the Euro escalates against the dollar or the trader may loose if the Euro falls. This is where the skill of the trader lies, to anticipate how a market is likely to move. The trader does not have sufficient time to make these decisions because the market is working in real time conditions. Even the smallest of delay can reduce profit margins or increase losses. A few traders rely on their instinct and experience while making these trades. However, most traders use analysis of market movements to come to buying or selling conclusions.