What is Forex?

Category: Finance

Forex is short for foreign exchange. It's sometimes abbreviated FX but don't confused that with the gamer's terms for effects. Forex is no game; it's about very real, very large sums of money. But there are a lot of games involving forex being played on the Internet. Be careful; the rules are not always what they seem to be...

Forex Online

Understanding Forex Trading

Forex refers to the biggest, freest marketplace in the world: the global trading of different nation's currencies or money. Dollars, euros, pounds and yen are all examples of currencies. If you live in a country that counts money in dollars, then euros are foreign currency to you. If you want to pay dollars to someone who uses euros, the two you will have to engage in foreign exchange, or forex.

It's elementary supply and demand. If I have lots of dollars and few euros, your dollar is worth only a small number of euros to me; perhaps only a fraction of a euro. On the other hand, if I have a shortage of dollars (and need them to pay someone else), then I will give you more euros for your dollar. If we can negotiate a mutually agreeable exchange rate - X dollars for Y euros - then we can do business.

Our dollars and euros are said to be "liquid" if each currency can be exchanged for another readily. Liquidity is vital to international trade, obviously. Fortunately, the forex market is extremely liquid. There is always someone willing to buy your dollars with whatever foreign currency you need, and enough players in the market that you can almost always find an acceptable exchange rate.

The more information you have about exchange rates, the better the deal you can negotiate and the better your profit on foreign exchange. The rub for small traders is that they don't get much market information. The forex market is a clique-ish one. The more currency you trade, the more information other large traders will share with you. If you trade a small amount of currency, you do so in nearly total ignorance of what a "fair" exchange rate should be. Small players in forex make money accidentally; most of the time, they lose.

Forex Scams

What if you have no money at all to trade? Logically, you will get no information that can help you make a profit; worse, you may well get misinformation deliberately fed to you in order to ensure that you lose money and someone else profits. This seems rather obvious but people, made foolish by greed, try to get something for nothing in the forex market all the time. And they get taken for a ride almost every time.

In my opinion, the individual layperson investor should NOT put any money into forex speculation! Even if you don't lose it in a scam, you need tens of millions of dollars in play to make any profits worth counting. The margins are that slim.

Forex4Free.org appears to be an example of this sort of scam. I say "appears" because I have no reliable information about how it truly works. But this is what has been told to me by Forex4Free's promoters:

There's a highly successful, international investor who can't be named. If he makes big forex trades in his own name, the evil banks and corporations will shut him out. So he wants to gather thousands of small traders, to act as his agents and trade his money. He actually wants to give me $200 for free to get started! Even better, I don't have to do the actual trading. Experts will do it for me and simply report how much profit I'm making.

All I have to do is open a virtual-money account with something called Liberty Reserve, sit back, and wait for things to happen. Well, after a week I haven't seen any $200 deposited in my Forex4Free account. I haven't been able to log in to my newly created Liberty Reserve account. I should be getting frantic because I'm missing out on all that free forex profit. For all I know, there is no investor. Any "$200" that appears in my Forex4Free account may simply be a number encoded in a Web page, not money in any bank. I don't know if Liberty Reserve actually exists; I'd never heard of it until this forex scam popped into my inbox. Things just don't seem right...

Here's what I suspect will happen next: I'll get an email from Forex4Free telling me that the $200 is waiting for me in Liberty Reserve, but I can't access it now due to technical problems. But hot opportunities are being missed! If I'll only put up $200 of my own (you know, as a loan, just until the problem with Liberty is resolved) then there's big money to be made. Maybe they'll ask for my social security number, or my Paypal or online banking passwords, so they can transfer money into my account. Get the picture?

Do you have something to say about online forex trading? Post your comment or question below...

 
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Most recent comments on "What is Forex?"

Posted by:

pdsterling
30 Apr 2010

you know, forex is a brand name of condoms. do you think there is a connexion?


Posted by:

marc
30 Apr 2010

Hi Bob, Marc from Spain, regular reader of your newsletter. Suppose you see my email already says it. I used to work in Foreign exchange until my health didn't allow for all that tension anymore ( yes heart attack, yes due to forex ...:( )
Would like to point you out a couple of things
I think you should complement your article with an article on HYIP (high yield inversion programs) this are known scams but then some people have tricks to win some money with them.
Secondly there are a lot of pay systems on internet (e-money systems ) e-gold being the most famous one.
As for forex I would like to add that making money in forex is actually very difficult (95% of the first time would-be private operators loose their money).

hope this helps you to continue to send out that good information.

Greetings, have a nice week-end
marc leon deruelle

p.s. keep up the good work I real appreciate your efforts.


Posted by:

chesscanoe
30 Apr 2010

I know of a guy who used to Forex very successfully. The problem is somewhere in the world is always open, so you must monitor conditions 24x7 real time to stay on top of things. He's happier and getting lots more sleep distributing bread now.


Posted by:

Bruno Oberski
30 Apr 2010

First - the hyperlink in the Forex article to "post a comment" does not work yet all the other hyperlinks in the article do. Why?
I've been having a running battle with this shceming outfit to ge to off their spam lists. I opened the email and got any and I mean any email addresses that I could and now when I receive a Forex spam I forward it with a big red header to stop trying to scam the gulibe and take me off their spam lists. They've block a few of the emails but I still get thru to a few of the others. Is there any way to report this outfit to authorities or block it???


Posted by:

Mike Jones
30 Apr 2010

I was one of the early victims of the new Cloud Computing phenomenon (after 46 years in IT) and chose Forex trading to supplement my income. I have been active in the Forex markets for a about a year now and I really love it. I highly recommend it to all of my IT friends.

The people I've met are great and the ones who seem to be making money are using the old fashioned approach - they work hard at it. There are no shortcuts. A solid education is critical. I am lucky I was introduced to the Forex Mastery training program early on. They are the best in the business.

While I have not been a victim of any scammers yet it's like any good opportunity out here. If it's a great opportunity the scammers will appear sooner or later. One cannot be too careful.


Posted by:

ivanhoe
30 Apr 2010

Everyone invests. This form is no different than others except that you must take a very active roll in your investment decisions. Many impatient people can not do that and so will find currency trading not to their liking. However you should consider that currency trading, unlike conventional investing, would have given you the opportunity to reverse your position in the market very quickly. How many people would have liked to have been short the market in 2008 in their 401ks?


Posted by:

Juan A. Martinez
30 Apr 2010

I will not claim to be smart or that I have never been "taken", because I know that it isn't true.
However as the saying goes "If it's too good to be
true, it (Always) is"


Posted by:

Danielle
11 May 2010

While the forex market is still confusing to me at present, I have found www.babypips.com to be VERY helpful in learning what it is and how to do it without being scammed. They are a wonderful learning tool.


Posted by:

ben
14 Jul 2010

well,thats a nice example for a forex view.. anyway there are many ways to trade with forex,you sounds like a professional enough to give us some tips once in a while.

i'll be happy to hear again from you.

thanks again


Posted by:

aasasasas
05 Sep 2010

Forex Blog:
http://currencytools.blogspot.com/


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