Trading currency online is happening literally 24 hours a day, with money exchanging hands almost constantly, to the tune of roughly $2 trillion a day. In comparison to the $20 billion average day of the stock market, the Forex market is without question much larger.

The biggest difference is that on the Forex market there isn’t any tangible material that is being bought or sold. There are also no certificates being issued to show how much an individual owns of another country’s money.

What is Forex Trading

In the Forex market all the trades are performed electronically and the currencies are traded in pairs, such as the US dollar being paired with the UK’s Euro. A trade primarily consists of trading a specific amount of USD/EURO for currency pairs from two other countries contained within one transaction.

There are also no brokerage fees involved for buying and selling on the Forex market with broker earning their money on the difference between the bid/sell/buy price (ie - the spread) of the currency at the time the trade is completed.

On the Forex market, a buyer of any particular currency pair is basically indicating their confidence in the economy of that particular country. If the economy improves after a buy is completed, and the value of their currency also improves corresponding to the value of other countries, the investment of the buyer increases in value as well. On the other side of that coin, if that particular economy falls, the value of the currency will also decrease on the open market.

Precise Projections Can Improve Profit Position

One of the primary keys to success in the fourth market is being capable of projecting what the economy in any one particular country is going to do in the short term. The majority of individuals trading on the Forex market are not in it for the long haul like they might be in the stock market. Many people use little indicators that predict the country’s economy will get better or get worse and will execute their trades accordingly.

Only until recent times the Forex market was open only to just a select few that very often made trades worth many millions of dollars in multiple currencies. With the advent of the internet and online brokers average people have been given the opportunity with only a few hundred dollars to get in on the same type of action as the big spenders. Nevertheless, prior to anybody simply jumping in online and opening an account, they should be well-versed in the economies of the numerous different countries.

To become familiarized with the Forex market can seem somewhat intimidating at first, but in actuality so can the stock market to a beginner. It takes time and practice with play money and experience prior to a person getting involved in becoming comfortable with getting their own cash on a country’s economic future.

Fed Chairman Ben Bernanke has stated that much depends on the depth of US housing declines from here, and in the UK Gordon Brown has said that the Government will do everything in their power to help homeowners. Prior to the MPCs quarter point rate cut last week, Brown went as far as saying that the Bank of England can afford to cut rates because the UK has low inflation. With oil around $109, low inflation might be gilding the lily somewhat, but Brown knows and fears that a plummeting UK housing market could have a dramatic impact on the wider economy.

Last week it was revealed that some mortgage companies actually put up their rates following the Bank of Englands rate cut. It was a further blow for consumers when it was announced that UK mortgage approvals were down 3.5% on the previous month, and to make matters worse house prices experienced their biggest monthly fall since 1992.The two factors are of course inextricably linked. Many, including chancellor Alistair Darling have argued that the UK wont follow the US with a housing slump. It is not just politicians who are be hoping the optimists are right.

Friday got off to a bad start and got worse as the day progressed. European equities were stagnant until the news of General Electrics earnings miss hit the wires. Almost immediately, the FTSE crashed 100 points with the DAX and CAC falling even further in percentage terms. GE was at one stage the worlds largest company by market capitalisation, and due to the fact it earns most of its revenue outside of the US, it is often seen as a bellwether for the global economy. US markets opened down on the news and were driven down lower with the release of the Michigan Consumer Sentiment Survey and inflation data, which showed the worst readings since 1982 and 1900 respectively.

Next week starts with UK PPI data on Monday, and the RICS house price balance around midnight. Tuesday starts with more UK inflation data, with CPI figures in the morning followed by US PPI and Empire State Business Conditions Index around midday. Average UK Earnings and bonus data arrives on Wednesday morning followed by US core CPI around lunchtime. US Unemployment Claims come in on Thursday with Friday being a relatively light day on the data front.

At one point last week the Nasdaq recorded its lowest volume for over a year and the VIX volatility index dropped to its lowest level since February. Low readings of the VIX can indicate complacency in the market and Fridays rout could be an indication that this was the case. As it is, Fridays sell off has hardly moved the VIX from its recent low and next week earnings season starts in earnest. There may therefore be some value in a volatility trade next week. Try an Up or down trade with BetOnMarkets.com, it will pays out if either of two triggers are hit. An up or down trade on the Nasdaq Composite with the triggers set as 2200 and 2400 could return 20% over the next 16 days.