Forex trading is the exchange of currencies from different countries. Forex is the short form for foreign exchange. For instance in the European countries they use the EUR or the euro while in the United States they use the USD or the US dollar. When you buy the euro and concurrently sell the US dollar then you are engaging in the Forex trade.

Forex trading is done through a market marker. You can choose a pair of currency for which to trade with. For example if you buy some 1000 Euros and they cost you 1200 USD then you can expect that by the end of the year they will be costing at around 1300 USD. If you sell all your Euros at the beginning of the year then you will receive 100 USD in gains. You should first contact a market marker with the intent of placing your order through the professional. You just have to go through the internet and place your order to the broker who then passes it to the interbank market through a partner and your position is filled.

When you decide to close the trade, your position is closed by the broker and he/she credits your account with a gain or a loss. The whole process can happen within just a few seconds. Forex trading is actually the most practiced trade in the universe. With its 24 hour capability it trades from 9 pm GMT on Sunday all through to 10 pm GMT Friday. It trades profits of 1.5 trillion dollars each day making it the biggest of all world stock exchanges.

Participants in the trade include the central banks, firms and individual investors. With the emergence of the electronic trading platform, individual investors can now trade in the market comfortably. They will have the same liquidity as the large investors. The trade makes up to 95% of the daily earnings. The next 5% comes from conversion of currency during buying of goods by governments and companies.

There are reasons why you should consider trading FX. One of them is liquidity; the speculators consider trading the high liquid majors where 85% of the trade occurs. The other currency pairs are weak and involve the risk of liquidity. It is not like the stock market where the spillage concerns the traders. When trading FX you have the trades being filled at the order price. There are many sellers and buyers and this reduces the risk of liquidity. You will also have the benefit of a 24 hour trading system.

Forex trading also involves trading on margin, which means that you can trade with more capital than you currently have in your account. This is mainly due to the reduced volatility compared to other markets which come about due to the less movement seen in the FX trade. The level of margin is as high as 1%. Your individual broker can set the leverage rate for you.

With forex trading, you can trade short or long meaning that you can either trade long or short. This means that you pair the trade currencies according to your anticipations in the trade. For example if you have a feeling that the US dollar will appreciate against the pound then you can buy the US dollar and make a gain on it when the pound is down. You can also sell your British pounds if you anticipate that they are going to depreciate against the US dollar.