What is Forex Trading ?

Forex trading also known as currency trading refers to a series of transactions on foreign exchange markets used by investors for speculative or hedging purposes. A basic forex transaction consists in the simultaneous buying and selling of one currency against another. Currencies are thus traded in pairs (majors or crosses) for instance: the Euro against the US Dollar (EUR/USD) or the British Pound against the US Dollar (GBP/USD). For example, buying the pair EUR/USD at 1.3305 means that you need 1.3305 USD to buy one euro.Trading forex can also be described as speculating on the direction of one currency against another. You make profit when the market moves in your favor and you lose if the market moves against you. For example, you'll buy EUR/USD if you think that the Euro will strengthen against the US Dollar. Conversely, if you think the Euro will weaken compared to the US Dollar, then you will sell EUR/USD.Although it may seem easy at first glance, there is much more to forex than meets the eye. Predicting market moves is a complicated matter and that's why Finotec has its own online forex Education Center where you can learn Forex. With Finotec, you may also practice online trading by opening a Forex Demo Account. The simulation platform will allow you to trade with virtual money in real market conditions. Once you have acquired the skills to trade, use our wide range of tools and indicators to make wise and informed decisions for successful online forex trading.Forex: the largest financial market!The investor's goal in Forex trading is to profit from foreign currency movements. Forex trading or currency trading is always done in currency pairs. For example, the exchange rate of EUR/USD on Aug 26th, 2003 was 1.0857. This number is also referred to as a "Forex rate" or just "rate" for short. If the investor had bought 1000 euros on that date, he would have paid 1085.70 U.S. dollars. One year later, the Forex rate was 1.2083, which means that the value of the euro (the numerator of the EUR/USD ratio) increased in relation to the U.S. dollar. The investor could now sell the 1000 euros in order to receive 1208.30 dollars. Therefore, the investor would have USD 122.60 more than what he had started one year earlier. However, to know if the investor made a good investment, one needs to compare this investment option to alternative investments. At the very minimum, the return on investment (ROI) should be compared to the return on a "risk-free" investment. One example of a risk-free investment is long-term U.S. government bonds since there is practically no chance for a default, i.e. the U.S. government going bankrupt or being unable or unwilling to pay its debt obligation