The Forex FX - Online Tutorial
1. Introduction
Retail participation in
off- exchange foreign currency (forex, foreign exchange, FX) market has
increased dramatically the past few years. In case you would like to
participate in the largest market on earth (forex) you must be familiar with
basic knowledge about these currencies markets.
Like a large number of
other investments, off – exchange foreign currency trading is characterized by
a high level of risk and may be not be suitable to your financial habits or
financial needs. In fact, trading in off – exchange foreign currency markets
can cause lose all of your initial investments and also you may be liable for
additional losses. As investor you need to arm yourself with the understanding
of the associated risk with these markets.
My articles on this blog do
not motivate you as reader to participate or do not to participate in off –
exchange foreign currency trading. On this blog I express my ideas, I provide
helpful articles for investors and as honestly as it can be, I present the fundamental
issues and major trends on foreign – currency markets.
2. The Foreign Currency Markets
The foreign currency
exchange rates
The foreign currency
exchange rates are the costs to exchange one country’s currency for another
country’s currency.
For example, if you go to
Greek islands on vacation, you will have to pay for your hotel, meals, and
admissions to museums, souvenirs and for other expenditures in Euro. Since your
money is in US dollars, you have to use (sell) some of your dollars to buy
Euros.
Assume you go to a US
In Mykonos (Greek Island )
€ 724 are not enough cash, so you will have to exchange more US dollars for
Euros while you are in Greece Mykonos and you get only € 718 for your $ 1,000. The
exchange rate for converting US dollars to pounds has dropped from .724 to
.7183. This means the US dollars are worth less compared to Euro than they were
before your holidays.
Assume that you have € 100
left when you return back in USA
3. The convertibility of Exchange Rate
You can convert the
exchange rate for buying a currency to the exchange rate for selling a
currency, and vise versa, by dividing 1 by the known rate.
As an example, if the
exchange rate for buying Euros with US Dollars is 0,724 (,724) the exchange
rate for buying US Dollars with Euros is 1, 38121 (1 ÷ ,724 = 1,38121).
Similarly, if the exchange
rate for buying US Dollars with Euros is 1,38121 , the exchange rate for buying
Euros with US Dollars is ,724 (1 ÷ 1,38121 = ,724).
This is how financial
on-line (web sites) or off line literature (newspapers, magazines) report
currency exchange rates.
4. The market wisdom
Practically is impossible
for an investor to buy or sell the currency at the same reported price on media
and to receive the quoted price in the newspapers.
This happens because banks
and other market participants make money by selling the currency to customers
for more than they paid to buy it and by buying the currency from customers for
less than they will receive when they sell it.
The above mentioned
difference is called SPREAD and is the cornerstone of the off – exchange
foreign (forex) currency markets.
Only through study you can
build a competitive advantage.
Knowledge is the first path
in an endless adventure of financial success”.
Elias Stoikos
Relative Articles
1. Forex Online Tutorial Part. 2
2. Forex Online Tutorial Part. 3
3. Forex Online Tutorial Part 4
Relative Links
1. Forex Online Tutorial Part. 2
2. Forex Online Tutorial Part. 3
3. Forex Online Tutorial Part 4
Relative Links
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