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Dollars fallingThere is plenty of information about Forex on the Internet, but sometimes it can be too much for those who are new to Forex. Here I have compiled a very basic and fundamental look at Forex.

What is Forex?

Forex is short for Foreign Exchange, which is a very general term for any process that attempts to make a profit from trading foreign currencies. Some examples of foreign currencies are the U.S. Dollar, the Chinese Yuan, the European Euro, the Italian Lira, the Japanese Yen, and the Mexican Peso. Forex is sometimes abbreviated to FX.

Who is George Soros?

George Soros, the man who “broke the Bank of England” is perhaps the world’s most famous Forex Investor. Soros made 1.1 Billion U.S. Dollars in one day, on September 16th, 1992. :shock:

What are the advantages of Forex over traditional investments?

The two biggest advantages of Forex over traditional investments are the Two-L’s: Leverage and Liquidity:

What is Leverage?

Leverage is a term which is used to describe a process where an investor will borrow money for a short period of time in order to increase any gains. Leverage can be accessed up to 100 to 1. For Example, if I wanted to purchase Chinese Yuan with 10,000 U.S. Dollars, I could potentially borrow up to one-million U.S. Dollars to purchase the Yuan. These are very often short term loans (less than a day). Obviously, leverage will also increase your losses, and can be very risky for the beginner to take on.

What is Liquidity?

Liquidity is a measure of the ease of selling a product. Products are considered to be liquid if they are easy to sell. For example, Real Estate is not considered liquid because of the long process involved in selling it, as well as the limited demand for each specific house. Stocks which are listed on the New York Stock Exchange are considered to be liquid. In the past few months, the NYSE has traded an average of around 100 Billion U.S. Dollars Per Day. Also, the NYSE is only open from 9 a.m. Until 5 p.m. Eastern Standard time Monday-Friday. Forex has an average traded value per day of 2-3 trillion U.S. Dollars and is open 24/7/365. The enormity of the Forex market is what makes Forex so liquid.

What are some good websites for a Forex Investor?

First off, a general knowledge of the world’s financial markets will help immensely, so for this I suggest finance.yahoo.com. For technical and analytical advice: theinvestmentmachine.com. Another blog for Forex: forexblog.org

How do I get started?

Well first off, you should subscribe to the www.PlentyOfLuck.com RSS Feed or Email Updates which will keep you up to date with our new posts. I would also bookmark any of the earlier websites that looked interesting to you. If you want to stop reading about forex trading and start actually forex trading without risking real money, you can get a practice account at eToro.com which will give you immense real-world experience without any real-world risk.

I hope this information was helpful and interesting. Notice, I didn’t actually show you how to profit from Forex trading. I have given you plenty of information about the concepts of Forex trading, but I haven’t showed you how to use them! I am going to give you some homework:

  • Go to eToro.com and sign up for a practice account.
  • Mess around in eToro. Pretend you have 10,000 U.S. Dollars and you want to make some money, given the information contained in this article, how do you think you could make a profit?

After you get some of the basics down, try some complex situations. Buy on margin. How does the margin affect the profit/loss? How does the interest rate of the loan affect the profit/loss?

Did you learn anything unexpected while messing around in eToro.com :?:

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