Guide To Forex Trading

Forex or foreign exchange refers to the trading of currencies. Trading of currencies can be for two reasons. The first of these is the conversion of currencies done by those companies or governments that buy or sell services and products in other countries and therefore need to convert their profits into their own currency. The second of the reason for forex trading is that of speculation or trading for profit. Since trading involves buying low and selling high, forex traders buy currencies, which are lower in value when compared to the other in the pair and sell it when the value rises.

As mentioned, currency trading is always done in pairs; therefore, the notation EUR/SGD signifies the value of the Singapore Dollar in terms of the Euro. Hence, if the rate for the given pair is stated as XXXXX, it signifies the number of Singapore Dollars needed to buy one Euro. The exchange rate of currencies differs due to certain factors like economic and political parameters, interest rates, activities of the market players and several such features. The most liquid or the most commonly traded currencies are known as the “Majors”.

The forex market is an inter-bank, inter-dealer or Over the counter market with the absence of any tangible market. All transactions are carried out on phones over an electronic network. The forex market trading has been revolutionized due to the presence of the internet and the availability of online trading platforms. To learn to trade forex, new traders or beginners are advised to register with one of the online platforms, which offer demo accounts. These demo accounts are practice accounts, where beginners can hone their trading skills. They can apply the known strategies and see the working of the forex market. The demo accounts are practice accounts, which make use of virtual money and therefore traders need not worry about the losses, if any.

Forex trading provides certain distinct features and for this reason, it is a good idea to trade forex over other securities. These advantages are:

• Leverage: nearly all brokers provide leverage to their clients, which enable the clients to place orders worth more than their investments. This leverage therefore, increases the return on the capital with lesser cash outlay.
• Trade as per your convenience: since forex is a 24-hour market, a trader can trade currencies any time or hour of the day. Asian traders may trade currencies as per their convenience and schedule and take decisions based on the current news and information.
• The most traded security: the daily turnover of the forex market is more than $3 trillion. The sheer volume of trade at forex enables price stability and there are improved chances of making money.