As information about the financial markets becomes more widely available, an increasing number of people become interested in investing and learning how to make money trading. A common starting point for beginners is the Forex
market. Forex stands for "Foreign Exchange" and refers to the trading of one country's currency against another (for example, EUR/USD (the Euro relative to the United States Dollar), or USD/JPY (the United States Dollar relative to the Japanese Yen).
It's important to realize that all currencies are traded in pairs, unlike a stock in the stock market which is just traded by itself. The reason for this is that a currency only has value relative to another currency. The USD (dollar) for example, can only go up or down in value relative to another currency. You may have experienced this outside of the Forex market if you have ever traveled to another country, exchanged your money for the local currency, and then when you came back home and changed your money back into dollars, found that you were given a different amount. The reason for that is the changing value of the US Dollar relative to the other country's currency.
So why would someone want to trade currencies?
The Forex market offers some advantages that aren't found in other markets. For example, it is open 24 hours a day, 5 days a week (but closes for most of the weekend). Unlike with the stock market, you can trade currencies anytime you want (except Saturdays).
Currency trading also allows unique sizing and leverage, which basically means you can trade as big or as small of positions as you want. Compare this against the stock market where you still have to trade a big enough size to be profitable after commissions (which admittedly may not be an issue for some people, but if you're a small trader or wanting to play it safe, it may limit what you can do), or the futures market where you are forced into a minimum margin size (such as if you trade the ES -- the S&P500 futures -- you cannot trade less than one lot at a time, which means each tick (the smallest movement of price possible) will cost you $12.50). With Forex, you can literally trade as small as you want, so that one pip (the smallest movement of price possible) will cost you only $0.01. With sizes like this, you can reduce the chances of losing your money before you learn enough to be profitable.
Of course, these aspects just scratch the surface. There are many more reasons why people turn to currency markets.
To learn more about Forex trading, please visit the Financial Trading School!
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