Forex and Currency Trading: Beginners Guideby Pooja Shetty Financial Advisor
The investment markets are a risky proposition for an inexperienced investor. Trading in any investment market is extremely difficult, but success comes with practice and education. So is currency trading the right investment option for you? Let’s educate ourselves more about this field.
Forex market (FX) or the currency market sees the highest amount of average turnover per day and is booming year after year. Until recently, major players in the currencies market were large financial institutions, central banks, corporations, and hedge funds, but the advent of internet has changed all of this. It is now possible for small investors to buy and sell currencies with the help of online brokers.
The market is open for 24 hours but closes for the weekend from Friday evening and remains closed until Sunday evening. All the currency trading is done in pairs. In the stock market you can sell or buy a single stock, whereas in the forex market you’ve to buy one currency and sell another one simultaneously.
Foreign exchange isn’t a volatile market, because percentage change of currency valuation in a day is miniscule. Currency speculators cash in on probable movements by relying on the massive leverage offered in the currency markets. Though high leverage can be risky, but good liquidity and 24 hours trading has enabled forex brokers to make high leverage an industry standard. This is done so that trading can be done on even the smallest of market movements.
High leverage opportunities and the extreme liquidity offered by currencies have helped to spur the market’s speedy development and presented good trading opportunities for several traders. Positions can be held for months or are opened and closed in minutes. Prices of the currencies are determined by supply and demand, and these cannot be influenced easily because of the huge size of the market. It also doesn’t allow big players like financial institutional investors to move the prices according to their will by buying/selling in large quantities.
There are ample opportunities in the forex market, but to become a profitable trader, one has to understand the basics of how the currency market works. Even after getting a hang of the basics, strategies that are actually profitable take time to develop. Due to the high risk factor associated with forex market, most brokers will have provision for you to trade virtually so that you can get a hang of the market and its movements. You can use it to trade and discover good strategies without the risk of investing your money.
Created on Nov 14th 2017 04:42. Viewed 539 times.