Q.

Answer
Having traded the FOREX for some time, I would say that learning and getting started are both easy. Making money however is quite hard. I would go to one of the FX broker websites and look for one that has a free demo account. Start your pretend trading account with a few thousand pretend dollars and when and ONLY when you have doubled it, open a real account with real money. You might lose all of that a few times before you get it right, as psychologically it is harder to trade with real money than imaginary money. Don't quit your day job right away.

The link below will take you to FX Street which is an excellent news site about the FX market, and will give you a list of FX brokers, many of whom can open a free demo account for you. FXCM is one of those brokers, also linked below. This is NOT an endorsement of FXCM. You may need to find a broker in your country of choice, and you should know that you can open an account in almost any currency you want to use as your base currency if you find the right brokers.

You should study up on technical trading, interpretation of chart patterns etc, and if you prefer a fundamental approach study macroeconomics and try to understand what economic events and forces will change the flow of currency.

I would not recommend spending a lot of money on some sort of magic software that supposedly tells you when to trade. I started that way and eventually did better trading without the expensive software than I did with it. The only ones making money with most of the fancy software out there are the ones selling the software. After all, if their software was so good, why do they need to sell it? They should be rich from trading their own accounts.

Also, look on Yahoo! groups for some support groups. They are quite active and can steer you towards group meetings in your area, training seminars, and even have live trading sessions with IM in the middle of the night.

what determines exchange rates in forex market?

Answer
What Determines Foreign Exchange (Currency) Rates
There are number of factors that contribute to changes in Forex rates. Below are some of them.

1. Interest rate movements
A rational investor will often look for the best place, in terms of returns, to park their money. If interest rates were high and outlook for the stock market is grim for example, then currency might be the better option (more attractive). Then, currency becomes more expensive due to the high demand..
Also, if you look at two countries. For example, the United States of America and Australia. Australia, at the present moment, has a higher interest rate than the US of A. Thus it makes more sense to park money here in Australia than in the US, thus earning a higher interest. Again, this will drive US Dollars down and push the Aussie Dollars up. This is what you call as⦠CARRY TRADE.

2. Central Banks Manipulation
A Central Bank can be a major player in the Forex market. It can buy and sell large sums of currencies to manipulate the market. There are many reasons to why central banks do this, but they will not be discussed here.
Bank Negara Malaysia was an influential player in the Forex market, to the point of getting a warning from Alan Greenspan, the then chairman of US Federal Reserve.
Also, referring to the 1st factor of interest rate movements, the central bank is the setter of interest rates.

3. Speculators/Traders
Pretty similar with above, the big players in the market like institutions or just people with heaps of money, they can influence Forex market movements by buying or selling large sums of currencies.

4. Unexpected News Announcements
Any unexpected political and economical news announcements can also cause movements in the Forex market.

5. Balance of Payments
Okay, this involves a few jargons like balance of payments, export, import, current accounts, deficits, and surpluses. Iâll just put them in an example.
Suppose a country is exporting goods & services more than it is importing, resulting in more money coming into the country. In this instance, the state of current account surplus is to be expected (letâs just assume that is in surplus). Large current account surplus will make the currency to appreciate.
Contrast this with a country that imports more than it exports (i.e. more money going out than coming in), in which current account deficits will exist (letâs just assume that it is in deficit). In this instance, the currency will depreciate.

All in all, we can conclude that at the end of the day, Forex rates are determined by supply and demand. If there is a high demand for a particular currency, it will appreciate. If there is a low demand for a particular currency, it will depreciate.