There are basically two types of Forex trading systems, mechanical and discretionary systems. The trading signals that come out of mechanical systems are mainly based off technical analysis applied in a systematic way. On the other hand, discretionary systems use experience, intuition or judgment on entries and exits. But which one produces better results? Or more importantly, which one fits better...

What Is Forex Trading?

David Morrison

Forex trading is nothing more than direct access trading of different types of foreign currencies. In the past, foreign exchange trading was mostly limited to large banks and institutional traders. However recent technological advancements have made it so that small traders can also take advantage of the many benefits of forex trading just by using the various online trading platforms to trade.

The currencies of the world are on a floating exchange rate, and they are always traded in pairs. About 85 percent of all daily transactions involve trading of the major currencies. Four major currency pairs are usually used for investment purposes. They are: Euro against US dollar (EUR/USD), US dollar against Japanese yen (USD/JPY), British pound against US dollar (GBP/USD) and US dollar against Swiss franc (USD/CHF).

If you think one currency will appreciate against another, you may exchange that second currency for the first one and be able to "stay" in it. If everything goes as you plan it, eventually you may be able to make the opposite deal in that you may exchange this first currency back for that other and then collect profits from it. As a note bear in mind that no dividends are paid on currencies.

Transactions on the FOREX market are performed by dealers at major banks or FOREX brokerage companies. FOREX is a necessary part of the worldwide market, so when you are sleeping in the comfort of your bed, the dealers in Europe are trading currencies with their Japanese counterparts. Therefore, the FOREX market is active 24 hours a day and dealers at major institutions are working 24/7 in three different shifts. Clients may place take-profit and stop-loss orders with brokers for overnight execution. Price movements on the FOREX market are very smooth and without the gaps that you face almost every morning on the stock market. The daily turnover on the FOREX market is somewhere around $1.2 trillion, so a new investor can enter and exit positions without any problems.

The fact is that the FOREX market never stops; even on September 11, 2001 you could still get your hands on two-side quotes on currencies. The currency market is the largest and oldest financial market in the world. It is also called the foreign exchange market or FX market for short. It is the biggest and most liquid market in the world, and it is traded mostly through the 24 hour-a-day inter-bank currency market.

When you compare them, you will see that the currency futures market is only one per cent as big. Unlike the futures and stock markets, trading currencies is not centered on an exchange. Trading moves from major banking centers of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S. it is truly a full circle trading game. In the past, the forex inter-bank market was not available to small speculators because of the large minimum transaction sizes and strict financial requirements. Banks, major currency dealers and sometimes even very large speculator were the principal dealers. Only they were able to take advantage of the currency market's fantastic liquidity and strong trending nature of many of the world's primary currency exchange rates.

Today, foreign exchange market brokers are able to break down the larger sized inter-bank units, and offer small traders like you and me the opportunity to buy or sell any number of these smaller units. These brokers give any size trader, including individual speculators or smaller companies, the option to trade at the same rates and price movements as the big players who once dominated the market.

About the author:

David Morrison gives you a handy, easy to understand intro to the wonderful, profitable world of forex trading. This article is free to publish - more information can be found at www.ForexTrader123.com

The latest information and news on Forex:

forex - Google News

Euro Forecast to Recover Against US Dollar on Options Sentiment - Daily FX

FXstreet.com The Forex Market
Euro Forecast to Recover Against US Dollar on Options Sentiment
Daily FX
Forex options risk reversals show distinct risk that the US Dollar may slip further against the Euro, Australian Dollar and New Zealand Dollar through ...
Forex: New Zealand Rate Decision and the Feder...
WORLD FOREX: Euro Gains As Global Economic Picture Brightens - Wall Street Jo...

Reuters
WORLD FOREX: Euro Gains As Global Economic Picture Brightens
Wall Street Journal
NEW YORK (Dow Jones)--The euro shook off lingering concerns over sovereign debt Wednesday to gain against the dollar ...
FOREX-Euro, sterling pressured by fiscal concernsReuters
FOREX-Yen firm, euro and pound hurt by...
FOREX-US dollar down vs euro; yen falls on easing bets - Reuters

Earthtimes (press release)
FOREX-US dollar down vs euro; yen falls on easing bets
Reuters
NEW YORK, March 10 (Reuters) - The dollar slipped against the euro while the yen fell on Wednesday, as risk appetite improved in ...
FOREX-Yen down on concern ahead of BOJ, pound slipsReuters India
Yen Gains on Spec...
WORLD FOREX: Euro Ticks Up Vs Yen On Japan Importer Buying - MarketWatch

WORLD FOREX: Euro Ticks Up Vs Yen On Japan Importer Buying
MarketWatch
... that Japanese importers' buying flows became more dominant and set the trend, said Yuzo Sakai, a foreign-exchange manager at Tokyo Forex & Ueda Harlow. ...

and more »
The Trend Trader For Forex Trading on Thursday, March 11, 2010 - Inside Futures

The Trend Trader For Forex Trading on Thursday, March 11, 2010
Inside Futures
The Trend Trader helps to identify the current trend status of your favorite forex markets. It not only helps us to stay ...

and more »
foreign exchange - Google News

China On Gold - Stating The Obvious - istockAnalyst.com (press release)

Washington Post
China On Gold - Stating The Obvious
istockAnalyst.com (press release)
Reuters reports on comments made by China's top foreign exchange manager at the annual gathering of the National People's Congress in Beijing on the subject ...
Play the Chinese Yuan's Fortunes with These E...
WW Grainger's daily sales up 12 percent in Feb. - The Associated Press

WW Grainger's daily sales up 12 percent in Feb.
The Associated Press
... Inc. said Wednesday that its daily sales rose 12 percent in February on acquisitions, seasonal product sales and favorable foreign exchange rates. ...
Grainger Reports February 2010 Sales ResultsMarketWatch (press release)
W.W....
RPT-Q+A-What foreign exchange reforms are brewing in Brazil? - Reuters

RPT-Q+A-What foreign exchange reforms are brewing in Brazil?
Reuters
Brazil's foreign exchange legislation includes law 4595, which creates the central bank and gives the national monetary council the authority to formulate ...

and more »
Grey Horse Reports 2009 Results - MarketWatch (press release)

Grey Horse Reports 2009 Results
MarketWatch (press release)
Our foreign exchange business continued to grow, and we completed our acquisition of Toro FX Inc. -- the level of interest rates remained low, ...

and more »
Lone Star to resume $3.9 billion KEB stake sale: KEB - Reuters

Lone Star to resume $3.9 billion KEB stake sale: KEB
Reuters
KEB has strength in foreign exchange trading and trade financing, and employs 7500 staff. A buyer would be able to leverage KEB's foreign networks to head ...

and more »