Home ✦ ✦ Unlabelled ✦ FX Trading – Trading on the Foreign Exchange Market
Posted by: Celestial Light Posted date: 8:39 PM / comment : 0
Forex trading is growing in popularity, thanks in no small part to the increasing availability of high-speed internet connections, and is attracting a wide variety of traders, including institutional investors, corporations, retail investors and currency speculators. The foreign exchange market, known as “forex” or “fx” to those in the know, is a global financial marketing for trading currencies. It’s the largest financial market in the world, with an estimated four trillion dollars being traded every day. Meanwhile the New York Stock Exchange sees just seventy four billion traded each day. The forex market allows buyers and sellers to trade across the world.
The wide availability of high-speed internet connections means that locations and time zones no longer inhibit online fx trading activity. There is no centralised marketplace in forex trading, so currency trading can take place in dealer networks or brokerages. Many people choose to conduct their activity through a retail FX broker who will charge commission on trades, but the system is accessible enough for a novice to be able to learn the ropes relatively quickly. Forex trading is different from equity trading in that it is based on leverage.
Currency pairs can be selected for trading, using automated third-party software or manually. While software might seem like the smart way to go, many of the most successful traders will tell you that nothing compares to the trading skills of the individual. Auto trading is a great way of excluding emotions from decision-making, but sometimes these emotions can help inform even better decisions. Either way, getting it wrong can mean incurring substantial financial losses for the trader.
A typical foreign exchange market trade would buy a given quantity of a currency while selling a portion of a different currency. This is usually the Euro and the U.S Dollar. If a trader thinks that the Euro will rise in value against the dollar in the future, they will buy Euros with US Dollars. If the prediction is accurate, and the exchange rate movement favours the Euro, the trader will then sell the Euros and turn a profit. If the prediction is inaccurate, a substantial loss could be incurred. Forex trading activities tend to depend on risk appetite, investment objectives and the level of experience held. The big debates in forex trading are around risk. Auto-trading software needs to integrate risk management into its processes and fx trading could gain even more popularity amongst traders and investors.
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