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japanese candlestick chart used by forex traders More than 1.5 trillion dollars are traded on the Forex market each day, compared to less than 60 billion on the New York Stock Exchange.  A large percentage of those trades are made by huge investment banks, including CitiFX, BNP Paribas Securities, and Mizuho Financial Group, among others.  Yet many individuals participate in Forex trading as well.

Compared to the large investment banks, which actually buy and sell hard currency, smaller-volume traders, like individuals, don't ever see any hard currency.  Instead, they speculate — on the price at which the large banks will buy and sell the currencies.

Forex is so attractive to these speculative traders for a couple of reasons:

  • First, the market is open 24-hours a day.  The global Forex market is traded in three sessions:  the North American session, which runs Monday through Friday from 8:00AM EST to 5:00PM EST (except on Friday, when it closes at 4:00PM); the Asian session, which runs Sunday through Friday 7:00PM EST to 6:00AM EST; and the European session, which runs from 2:00AM EST until 11:00AM EST.

  • Second, the Forex market is more highly leveraged than many other markets.  That means you can speculate on $100,000 worth of currency with only $1,000 in your account (or sometimes less).

  • Third, there are no restrictions on entering long or short positions.  You can sell just as easily as you can buy — opening up twice as many trades than if you were limited to long positions.

Just as online stock trading is not for the amateur investor, trading the Forex market without the direct help of a broker is wise only if you can read charts, conduct technical analysis, and understand the kinds of news that affects the Forex market.  Many online Forex brokerages will let you test your skills for free with a demo account — so you can see if you know enough to trade profitably before you put your hard-earned money on the line.

For information about foreign exchange brokers, visit the Forex Brokers Information Table.  Please note that trading foreign exchange currencies on margin may not be suitable or prudent for all investors.  Forex trading is a speculative activity that involves a substantial level of financial risk.

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Forex Trading Guide