Forex trading is short for foreign exchange trading and it’s sometimes also known as FX trading. It’s a popular market for investors to get involved in, especially as the internet has made it much easier for individuals to start up in Forex trading so it’s no longer the preserve of dominant financial institutions. Forex trading is based around currency and so before you get started it can be worth doing some research into the sort of factors that affect how strong or weak a particular currency is, as this can affect investment opportunities. Foreign exchanges take place between computer networks rather than one central location, which is why the internet has been so useful for individual investors interested in the market. Trading can essentially take place twenty four hours a day, because as soon as trading ceases for the day in one financial centre, it will open again in another time zone. Common financial centres involved in Forex trading include New York, London, Tokyo, Frankfurt, Zurich, Singapore, Hong Kong, Sydney and Paris. There are three main markets involved in Forex trading and it’s definitely worth getting to grips with them: the spot market, forwards and futures markets. The spot market is where currencies are bought and sold according to their current value. Currency value is based on things such as supply and demand, interest rates, economic performance and political situations. Essentially, a spot deal is when one party agrees with another to buy a certain amount of one currency for a certain amount of another currency. Settlements are made in cash. However, the forwards and futures markets tend to deal in contracts rather than cash, which means they differ considerably from the spot market. Each contract represents a currency and details a price per unit with an agreement to settle on a future date. Contracts in the forwards markets are decided directly between parties. Futures markets, however, tend to depend on the future performance of public commodities markets and so are differently regulated to the other markets. Upon expiry, the contracts are settled for cash unless they are bought and sold again before the expiry date. Often, investors make use of the forwards and futures markets as they offer some protection against the fluctuations of the currency markets and they tend to be favoured by large corporations. If you are going to get involved in Forex trading then you definitely need to be aware of the risks involved. Even though a certain currency might seem like a sure bet, you can never be entirely certain that what you think will happen will actually happen. This means that you need to limit risk wherever you can and learn how to read financial situations well to give yourself the best possible chance of success. Leverage is high in the forex market, which means that there is a lot of liquidity and so investors need to react quickly to changes in order to minimise losses and maximise gains. Forex trading can be very worthwhile but it does require a commitment in both time and money as it can be quite volatile and it’s a serious business. There is potential to make money here, but you need to be dedicated to learning and understanding the markets if you want to succeed. Related osts: Forex Trading – The Basics Online forex currency trading guide for beginners What is Forex Trading?