The origin of forex trading can be traced procedure to trade in forex market to the ancient times. Exchange and trade of currency enabled people to buy and sell items such as pottery and food. If the currency of one land held more gold either because of its size or the content of the metal, then a merchant could exchange a fewer number of these for a larger number of the lesser valuable currency or even a larger amount of material goods.
Forex market is the place where different currencies are traded. Any foreign currency is important because it has to be exchanged to conduct business or trade across the borders. In the forex market, you can buy any one currency of your choice while simultaneously selling another one. The forex market is an OTC market, one without any central marketplace, in which the trader exchanges the currency that is sold for the currency that is bought.
All the transactions take place via electronic networks or the phone, sometimes with the help of online forex brokers. The most liquid currencies are traded by individuals as a means for making money. The major currencies that are traded include US Dollar, Euro, Swiss Franc, Japanese Yen, Canadian Dollar, British Pound and the Australian Dollar. A majority of the trading that takes place worldwide uses these major currencies. Some companies also convert profits from their operations abroad to domestic currency.
The forex market works at several levels consisting of financial institutions, banks and dealers. There are three methods using which individuals, institutions and corporations conduct forex trading: spot market, forwards market and futures market. The spot market is the largest and the forwards and futures markets are derivative markets. Now that you know something about what forex trading is, let us discuss why you should get involved in the currency market as it is becoming more popular by the day.
Forex trading goes on around the world in different countries during their business hours. This enables you to trade major currencies at any time during the day or night at your convenience, even from the comfort of your house. This is to say that you can start off forex trading on a part time basis, gain the required knowledge and then delve into it as a full-time profession. In the case of many of the financial markets, short selling may be a difficult proposition. However, there is no limitation when it comes to shorting currencies. You can buy a currency, if you believe that its price will go up and sell the same currency whenever you think its price will fall. This is to say that there is nothing called bearish situation in the forex market.