FOREX Basics.

What is it?

On the FOREX exchange you can buy and sell currencies. For example, you might buy Japanese yens (by exchanging them to the dollars you had), then, after yen / dollar ratio goes up, you sell yens and buy dollars again. At the end of this operation you are going to have more dollars, then you had at the beginning.

The FOREX market has much higher liquidity, then the stock market, as much more money are being exchanged. Also, it does not have "exchange places", like stock market does. FOREX is spread between banks all over the world, and as the result, it is open 24 hours, during the business week.

Unlike stocks, FOREX trades are performed with high leverage, usually it is 100. It means that by investing $1000 you can control $100,000, and increase potential profits accordingly. Some brokers provide also so called mini-FOREX, where the size of minimum deposit equals $100. It makes possible for individuals to enter this market easily.

Important note: Trader software comes with indicators, that are configured to assume margin (leverage) equal 1 stock operations and 100 for FOREX.

The name convention. In FOREX, the name of a "symbol" is composed of two parts - one for first currency, and another for the second currency. For example, the symbol usdjpy stands for US dollars (usd) to Japanese yen (jpy).

As with stocks, you can apply tools of the technical analysis to FOREX charts. Trader's indexes can be optimized for FOREX "symbols", allowing you to find winning strategy.