This article covers the basics of trading on the foreign exchange Sydney market.
Although the forex market is the largest global financial market, it does not attract as much attention as the stocks and bonds markets. The value of daily transactions in this market currently exceeds $5 trillion.
In this market you trade money. You buy and sell currencies. The trading is not done via a centralised exchange, but rather through a number of financial centres. You can trade 24 hours of each day, for five business days of each week. This implies that dealers are available to buy or sell your currency pair at any time of day or night, regardless of where you are in the world.
The improvement in trading technology has made it possible for individual traders to successfully enter this trading market. In the past, central banks, large corporations and governments were the main participants in the market. The use of the internet has opened the way for individual traders. All you require to trade in this market is a good computer, a fast internet connection and suitable trading software.
How Different is the Foreign Exchange Sydney Market?
The foreign exchange Sydney is very different to other financial markets in quite a few ways.
- Trading Hours
The market is active during the day and night, regardless of your time zone. The currency pairs you trade will determine the times you should be trading
- Fewer Rules
Unlike the stock market, the foreign exchange Sydney market is decentralised which means you do not trade through the large Stock Exchanges. There is no central point of exchange or governing body. There is no need for a clearing house to ensure that the transaction is fulfilled. You are able to make use of insider information in this market without being legally liable
You do not have limits on the amounts you are able to trade. If you wanted to trade $10 billion, you are able to do so
- Entry and Exit
The volume and the liquidity in the market make it easy for you to enter and exit trades easily. You will not be stuck without currencies to buy or sell
You are not liable for exchange, brokerage or clearing fees in this financial market. Foreign exchange brokers make a profit on the difference between your buy and sell prices
Profit and Loss
When you convert your currency to another currency, you are betting that the currency you have purchased will increase in value. This implies that upon conversion to your initial currency, you would show a profit. For example, you have USD900 and you exchange it for AUD950. You hold on to that position for about a week and by then the AUD/USD exchange rate has gone and it is now worth USD1000. This indicates that if you were to sell your Australian dollars and convert it to US dollars, you would have USD1,000 instead of USD900 in your hand. This means that you have made a profit of USD100. This is a basic calculation of how it works, but there are many factors to consider when you enter your trades.