CHAPTER 1
The Fundamentals of Forex Trading
Gregory: “Draw thy tool …”
Sampson: “My naked weapon is out.”
—Shakespeare, Romeo and Juliet
Welcome to the world of forex trading. Forex is the largest market in the world. Forex traders exchange $4 trillion each day, but is forex the best market for you? The answer depends on what you are looking for. If you want a market that never sleeps, if you want the opportunity to trade at any time of the day, if you would like to make a boatload of money in a short amount of time, forex may be for you (it should be noted that you may also lose an incredible amount of money in a short amount of time). Traders with very little money can begin trading forex. In forex, you may take relatively large trades with small amounts of money because of the favorable leverage requirements. There are many reasons to become a forex trader, but before jumping into the reasons, perhaps we should take a closer look at the characteristics of a forex trade.
A QUICK LESSON IN CURRENCIES
“Forex” is simply an abbreviation for “foreign exchange.” All foreign exchange transactions involve two currencies. If an individual trader, a bank, a government, a corporation, or a tourist in a Hawaiian print shirt on a tropical island decides to exchange one currency for another, a forex trade takes place. In every instance, one currency is being bought and, simultaneously, another currency is being sold. Currencies must be compared to something else in order to establish value; ...
