Introduction to Forex

I'm sure you've already heard of Forex trading. 
it is one of the hottest topics around these
days. But what exactly is it and how can the
average Joe make money in Forex?

Forex, also called "FX", is short for foreign
exchange. The foreign exchange doesn't get the
big press like stocks, options, and commodities.
But the foreign exchange is the biggest market
in the world and it offers investors an incredible
opportunity for profit.

When you trade on the foreign exchange, you don't
trade in stocks or bonds, but in currency. Simply
put, Forex trading is just the buying of one currency
and the selling of another. As exchange rates go up
and down, you either make or lose money.

With Forex, you're not investing in a single company
or even a group of companies. You're investing in the
economy of nation. You are betting that the overall
economic health of one nation will improve in relation
to that of a second nation.

For example, let's say you are analyzing the US Dollar
and the Japanese Yen. Your research seems to indicate
that the US dollar is undervalued and is due for a rise
in price, and at the same time you expect the Japanese
Yen to lose value. In this case you would execute a
trade to buy US dollars and sell Japanese yen. If you
are correct and the exchange rate rises, you make a
profit!

So its a piece of cake, right? Well no, not really.
Currency prices can be incredibly difficult to forecast
because there are so many factors that can contribute to
a change in exchange rates. And you must remember that
in currency trading you always trade in pairs. You buy
one currency and sell another. So you can't just look at
one nation's economy; you must look at two.

Of course, you do not have to limit yourself to only one
pair of currencies. There are dozens of different currencies
to choose from. But if you are just starting out, I suggest
sticking to the seven major currencies:

USD - US Dollar

EUR - the Euro

GBP - British Pound

JPY - Japanese Yen

CHF - Swiss Franc

AUD - Australian Dollar

CAD - Canadian Dollar

Most small investors concentrate their trading on just these
seven currencies.