The Forex market has much higher liquidity, then the stock market, as much more money is being exchanged. Forex is spread between banks all over the planet and as a result it means 24 hour Forex Trading.

Unlike stocks, Forex Trading are performed with high leverage, usually it is 100. It means that by investing $1000 you can control $100,000, and increase potential profits accordingly. Some brokers provide also so called mini-Forex, where the size of minimum deposit equals $100. It makes possible for individuals to enter this market easily.

The name convention. In Forex Trading, the name of a "symbol" is composed of two parts - one for first currency, and another for the second currency. For instance, the symbol usdjpy stands for US dollars (usd) to Japanese yen (jpy).

As with stocks trade, you can apply tools of the technical analysis to Forex Trading charts. Trader's indexes can be optimized for Forex Trading "symbols", allowing you to find winning strategy.

Example Forex Trading transaction

Assume you have a Forex Trading account of $25,000 and you are trading with a 1% margin requirement. The current quote for EUR/USD is 1.3225/28 and you place a market order to buy 1 lot of 100,000 Euros at 1.3228, expecting the euro to rise against the dollar. At the same time you place a stop-loss order at 1.3178 representing a maximum loss of 2% of your account equity if the trade goes against you, 50 pips below your order price, and a limit order at 1.3378, 150 pips above your order price. For this Forex Trading, you are risking 50 pips to gain 150 pips, giving you a risk/reward ratio of 1 part risk to 3 parts reward. This means that you only need to be right one third of the time to remain profitable.

The notional value of this Forex trade is $132,280 (100,000 * 1.3228). Your required margin deposit is 1% of the total, which is equal to $1322.80 ($132,280 * 0.01).

As you expected, the Euro strengthens over against the dollar and your limit order is reached at 1.3378. The Forex Trading position is closed. Your total profit for this Forex Trading is $1500, each pip being worth $10.