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Chapter 1.1
The Forex Market
                   0
together can you determine how strong or weak each currency is in
THE FOREX MARKET                                                                  relation to the other currency.
The Forex market is the largest financial market in the world. Nearly
$3.2 trillion worth of foreign currencies trade back and forth across the         Currencies always trade in pairs. You never simply buy the euro or sell
Forex market every day. Forex stands for the foreign exchange—the                 the U.S. dollar. You trade them as a pair. Some of the most well-known
financial exchange on which governments, banks, international                     currency pairs are:
corporations, hedge funds, and individual investors exchange foreign
currencies.                                                                            EUR/USD              (Euro / U.S. dollar)
Those of you who travel abroad frequently have probably also noticed                   GBP/USD              (British pound / U.S. dollar)
that the exchange rates at the currency counter at the airport never
seem to be the same. They are constantly changing. Sometimes you get                   USD/JPY              (U.S. dollar / Japanese yen)
a lot more bang for your buck when you exchange your money, and
sometimes you have to exchange a few more euros, British pounds or
U.S. dollars just to get by. That is because exchange rates are constantly        Investors, just like you, make money every day by trading currency
changing, and it is these changes in exchange rates that enable you to            pairs. By determining what is going to happen to a currency pair in the
make a lot of money in the Forex market.                                          future, investors can act today to take advantage of coming price
                                                                                  movements.


FOREX INVESTORS TRADE CURRENCY PAIRS
Everything is relative in the forex market. The euro, by itself, is neither
strong nor weak. The same holds true for the U.S. dollar. By itself, it is
neither strong nor weak. Only when you compare two currencies




                                                                              1
Currency pairs can do one of the following three things:                       Fundamentals make currency pairs move. If the economic fundamentals
                                                                               in the United States are improving, the U.S. dollar (USD) will most likely
                                                                               be getting stronger because forex investors will be buying dollars.
                 They can go up                                                Conversely, if the economic fundamentals in the United States are
                 They can go down
                                                                               declining, the U.S. dollar (USD) will most likely be getting weaker
                 They can go sideways
                                                                               because forex investors will be selling dollars.

If you can determine which way a currency pair is going to move, you
can become quite profitable.
                                                                               GETTING STARTED
                                                                               Thousands of investors, just like you, are taking advantage of the profit
                                                                               potential of the forex market. Once you understand what drives the
WHAT DRIVES CURRENCY PAIRS                                                     forex market, all you have to do is open a trading account, do your
The key to making money in the forex is understanding what makes               research and click a few buttons in your online trading station. Then sit
currency pairs move. Ultimately, it is investors who make currency pairs       back and monitor your trades. It may take a little practice, but before
move as they buy and sell different currencies, but these investors buy        long, you’ll be making money like a seasoned professional. Start letting
and sell for a reason. Either they see something happening                     your money work for you.
fundamentally in the global economy that makes them believe a
currency is going to get stronger or they see something happening
fundamentally that makes them believe a currency is going to get
weaker. In other words, they watch the fundamentals and make their
decisions according to what they see.




                                                                           2
3
Disclaimer
None of the information contained herein constitutes an offer to purchase or sell a financial instrument or to make any investments.
Saxo Bank A/S and/or its affiliates and subsidiaries (hereinafter referred to as the “Saxo Bank Group”) do not take into account your
personal investment objectives or financial situation and make no representation, and assume no liability to the accuracy or
completeness of the information provided, nor for any loss arising from any investment based on a recommendation, forecast or other
information supplied from any employee of Saxo Bank, third party, or otherwise. Trades in accordance with the recommendations in an
analysis, especially, but not limited to, leveraged investments such as foreign exchange trading and investment in derivatives, can be
very speculative and may result in losses as well as profits. You should carefully consider your financial situation and consult your
financial advisor(s) in order to understand the risks involved and ensure the suitability of your situation prior to making any investment
or entering into any transactions. All expressions of opinion are subject to change without notice. Any opinions made may be personal
to the author and may not reflect the opinions of Saxo Bank.

Please furthermore refer to Saxo Bank's full General Disclaimer: http://www.saxobank.com/?id=193




                                                                    4

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THE FOREX MARKET (1.1)

  • 2. together can you determine how strong or weak each currency is in THE FOREX MARKET relation to the other currency. The Forex market is the largest financial market in the world. Nearly $3.2 trillion worth of foreign currencies trade back and forth across the Currencies always trade in pairs. You never simply buy the euro or sell Forex market every day. Forex stands for the foreign exchange—the the U.S. dollar. You trade them as a pair. Some of the most well-known financial exchange on which governments, banks, international currency pairs are: corporations, hedge funds, and individual investors exchange foreign currencies. EUR/USD (Euro / U.S. dollar) Those of you who travel abroad frequently have probably also noticed GBP/USD (British pound / U.S. dollar) that the exchange rates at the currency counter at the airport never seem to be the same. They are constantly changing. Sometimes you get USD/JPY (U.S. dollar / Japanese yen) a lot more bang for your buck when you exchange your money, and sometimes you have to exchange a few more euros, British pounds or U.S. dollars just to get by. That is because exchange rates are constantly Investors, just like you, make money every day by trading currency changing, and it is these changes in exchange rates that enable you to pairs. By determining what is going to happen to a currency pair in the make a lot of money in the Forex market. future, investors can act today to take advantage of coming price movements. FOREX INVESTORS TRADE CURRENCY PAIRS Everything is relative in the forex market. The euro, by itself, is neither strong nor weak. The same holds true for the U.S. dollar. By itself, it is neither strong nor weak. Only when you compare two currencies 1
  • 3. Currency pairs can do one of the following three things: Fundamentals make currency pairs move. If the economic fundamentals in the United States are improving, the U.S. dollar (USD) will most likely be getting stronger because forex investors will be buying dollars. They can go up Conversely, if the economic fundamentals in the United States are They can go down declining, the U.S. dollar (USD) will most likely be getting weaker They can go sideways because forex investors will be selling dollars. If you can determine which way a currency pair is going to move, you can become quite profitable. GETTING STARTED Thousands of investors, just like you, are taking advantage of the profit potential of the forex market. Once you understand what drives the WHAT DRIVES CURRENCY PAIRS forex market, all you have to do is open a trading account, do your The key to making money in the forex is understanding what makes research and click a few buttons in your online trading station. Then sit currency pairs move. Ultimately, it is investors who make currency pairs back and monitor your trades. It may take a little practice, but before move as they buy and sell different currencies, but these investors buy long, you’ll be making money like a seasoned professional. Start letting and sell for a reason. Either they see something happening your money work for you. fundamentally in the global economy that makes them believe a currency is going to get stronger or they see something happening fundamentally that makes them believe a currency is going to get weaker. In other words, they watch the fundamentals and make their decisions according to what they see. 2
  • 4. 3
  • 5. Disclaimer None of the information contained herein constitutes an offer to purchase or sell a financial instrument or to make any investments. Saxo Bank A/S and/or its affiliates and subsidiaries (hereinafter referred to as the “Saxo Bank Group”) do not take into account your personal investment objectives or financial situation and make no representation, and assume no liability to the accuracy or completeness of the information provided, nor for any loss arising from any investment based on a recommendation, forecast or other information supplied from any employee of Saxo Bank, third party, or otherwise. Trades in accordance with the recommendations in an analysis, especially, but not limited to, leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits. You should carefully consider your financial situation and consult your financial advisor(s) in order to understand the risks involved and ensure the suitability of your situation prior to making any investment or entering into any transactions. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of Saxo Bank. Please furthermore refer to Saxo Bank's full General Disclaimer: http://www.saxobank.com/?id=193 4