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For most common traders, the foreign exchange market is relatively unfamiliar ground. Until more recently, currency exchange was not common practice for the retail investor. Instead, foreign currency investment was dominated by large financial institutions, big money investors, and multinational corporations. The Internet has opened the floodgates to this emerging investment option. As more information surfaces, popularity will continue to grow in the UK, which is currently the largest trading hub of foreign currency in the world. Prospective investors who want to learn Forex trading can read about different strategies, research investment opportunities, and learn hands-on by participating in the market through a demo account with a brokerage service.
 

What is Forex?

 
For those who do not know, the foreign exchange market, Forex, or FX, is the market where currencies, or money, is traded. Unlike trading stocks, bonds, or options, there is no centralized marketplace or governing body. The foreign exchange industry is self-regulated. There are also often no commissions or brokerage fees in the FX market. Brokers collect a profit on the spread between the buying and selling price of the currency. Many investors are lead to believe there will be a physical exchange in currencies upon completion of each transaction. However, this is not the case. All trades simply exist as computer entries and are netted out depending on the market price. All profits and losses are calculated in the base currency and recorded on the trader’s account history. It helps to think of money as a commodity; essentially, investing in a country’s currency is investing in the success or failure of their economy.
 

Speak the Language

 
Like many other industries, the currency market has its own language. Understanding the jargon can help you understand what you’re hearing or reading. For example, sterling and pound are different names that refer to the GBP. Selling a yard means selling a billion units. Understanding the language will go a long way towards making you sound like you know what you’re talking about.
 

Most Traded Currencies

 
There are seven pairs that are considered to be the most traded currency pairs in the world. The four most popular are the EUR/USD, USD/JPY, GBP/USD, and the USD/CHF. There are three less popular commonly traded currency pairs known as commodity pairs, and they include the AUD/USD, USD/CAD, and NZD/USD. These currency pairs and their various combinations make up for nearly all of the speculative trading transactions that occur on the foreign exchange. These are not the only currencies that can be traded. More exotic and risky currencies are available for trade as well, if you are in search of a higher potential return.
 
If you are interested in learning about Forex trading, it goes without being said that there is an undeniable learning curve. However, today’s marketplace and brokerage services have made it easier than ever before to learn about and participate in currency exchange risk free. Signing up for a demo account is a great way to get your feet wet and learn about how to make money in foreign exchange markets. 

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