Basics of the Forex Markets

The Forex (foreign exchange) markets are the biggest and most liquid in the world.

Every day about 4 Trillion US dollars (USD) are turned over on that market. Compare that with 50 Billion/d on the New York Stock Exchange and the GDP of the UK/yr being 2.9 Trillion USD. A UK Trillion is 1000 Billions. For some other figures (which may vary) see here. Average daily volume of trading on Forex has been increasing by 20% per year from 2008. Forex trading is not the stock markets; just to be clear.

Until a few years ago – before the internet truly got going – most average people could not have tapped into the Forex (FX) markets. All that has changed. Using leveraged products such as spreadbetting and CFDs (in Europe) ordinary people can dip into the FX markets without actually purchasing currency. That may sound strange – and I don’t propose to divert onto explaining all that (some of which is covered elsewhere on this site. See Financial Trading – What’s that? and Spreadbetting compared to shares).

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So if you’re wondering, ‘How do I get into this and make some money?’ – I’d suggest slowing down and thinking about it more carefully. Only a small percentage of people (about less than 5%) flirt with Forex trading of any kind. Of that 5% about 90% do not remain. Of the 10% who stick with it, only about 3 to 5% will be successful profitable traders. [This is not a well researched area so there are no hard figures I could find. Internet searches turn up all sorts of figures]. Great expertise is required for success. If you see stock markets as ‘dangerous’ then FX markets are probably 100 times more dangerous in terms of losing money quickly. But how do people acquire expertise in FX market trading?

Money
Some will be thinking, “I ain’t got no money to gamble!! Get me outta here!” No one is asking you to part with your money, but you can keep clutching your credit card or cheque book if that makes you feel safer. You don’t need money!! You need expertise – then think about money. Why would anybody want to part with their money in such a risky game, without first gaining the required expertise? If you thought, “I’d have to be profoundly stupid to put money into such a dangerous thing!” – you’d be perfectly correct. And you’re not stupid.

Expertise
Consider expertise from another angle. In the USA about only 0.3% of the population are doctors and of those, the fraction who become neurosurgeons, is exceedingly small. I deviate onto that slightly to explain by analogy that:

1. knowing the basics is not enough.
2. gaining a highly specialised skill is not easy and highly de-selective.

Brain surgery is also seen by some as ‘potentially dangerous’ – but suitably qualified surgeons can do it and help people needing highly skilled operations. The point of the latter statement, is that some things are taken at first glance as ‘dangerous’ but with the right knowledge, skill and experience, can be managed for benefit. A brain surgeon may take 15 years from entry to medical school, to become an expert and spend £100,000 (or more) to acquire expertise in neurosurgery. However, a new entrant to Forex trading can gain the requisite skill to become successful (profitable) in 2 to 5 years time, depending on degree of discipline and training etc. It can be done in risk-free environments, with no output of personal capital – even for training.

I’ve only picked brain surgeons above by analogy because they’re seen to be so ‘sexy’. But I could equally have been referring to firemen, neonatologists, pathologists, lawyers, pilots or bomb disposal experts (by analogy), to explain how much expertise is needed. And yes – bomb disposal experts do on occasion get blown up! I just knew you were gonna think that. LOL

Have a peek below and hold on tightly to that credit card. But sure as hell, no one is gonna ask you to part with your money – and you shouldn’t! Instead – how would you like £10,000,000 of free money to play with, burn or throw away – absolutely no strings or hidden strings attached, ever? Ooops.. your credit card almost snapped in half, or is warped out of shape after reading that. Take it easy! :)  I know – this is sounding too much of a sales pitch. And if you’re thinking, “If it sounds too good to be true, then it most probably isn’t!”  How would I know what you’re thinking? Because I had thought the same too.

To take a no-risk sneak peak, see good videos below.

If you need more facts and figures start here.

For the avoidance of doubt or further suspicion, this is only an introductory article on the very basics of what happens in FX markets designed to arouse interest. No one reading this post is advised to start trading in Forex or leveraged markets. The emphasis always at this site will remain permanently on gaining expertise and demonstrating profitable trading skill in a risk-free environment, before venturing to part with your money.