The term “Forex” comes from the words 'Foreign' and 'Exchange' and simply means to take part in trades involving the exchange of one countries currency with another.
It’s like if you’ve been to a foreign country, traded a lot of money in cash into that currency, then ended up with more cash at the end of the holiday and traded it back into sterling – only to find that the shift in the exchange rate has been great news for you – or maybe just the opposite.
Had you realised which way things were going to go, you could have bet a large amount of your cash on the movement and lived like George Soros for the rest of your days.
Alas, life isn’t like that, but investing on the ay you think things are going to go can be great fun. It can also be very useful if you plan to visit a foreign country in the future and want to shore up your finances today.
Say, for example you’re planning a big trip to the Sates next summer and you think the $1.56 or so on offer from the Forex markets currently is good value as you hold your money in pounds – then you could trade on the back of that ‘strike price’ today, without actually parting with your cash – or just a small proportion of it anyway.
The major currencies involved in the Forex market include the US dollar, the British pound, the Euro, the Australian dollar, the Japanese yen, the Canadian dollar, and the Swiss franc.
In fact, somewhere around 85% of all Forex trading centres around these major currencies. So why not try your hand first with a small amount – and see if you’re going to be the next George Soros?
This article was written by David, a keen financial blogger. He's always eager to give people advice if they want to learn forex, as it's definitely his forte.
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