Once, foreign exchange trading was something that people had to do when traveling to another country. This includes exchanging some of their home country’s currency for another by undergoing the current currency exchange rate. Nowadays, when you hear someone refer to foreign exchange trading, they are usually referring to a type of investment trading that has become common. Traders can now speculate on the currency fluctuating values between two countries and make investment decisions accordingly.
Forex (FX) is the market in which such trading is organised. The forex market is the largest, most liquid market in the world with average traded value is trillions of dollars per day. There is no central marketplace for such exchange; trade is conducted over the counter. The FX market is open 24 hours a day, five days a week, except for holidays for the currencies to get traded worldwide. The market is open to any person, firm or country may participate.
What Is Forex – FX?
The term foreign exchange is usually abbreviated as “forex” and sometimes as “FX.” Forex transactions take place either on a spot or a forward basis. There is no centralized market for foreign exchange transactions. They are executed over the counter and around the clock. The largest forex markets are located in major financial centers like London, New York, Singapore, Tokyo, Frankfurt, Hong Kong and Sydney. The FX market is unique for several reasons, mainly because of its size.
How Does Foreign Exchange Trading Works?
It seems that in this particular industry there is a high rate of failure among new traders. Even traders who start with an attitude of “It happened to them, but it won’t happen to me.” tend to fail at the first instance. So, maximum of them walk away empty handed, not being sure what actually went wrong. To the worst, they even feel a bit scammed.
Trading in foreign exchange is definitely not a scam, it is an industry that needs enough knowledge to understand how it works. The aim of new traders should be to survive long enough to understand the mechanism of foreign exchange trading and become one of those able insiders.
The number one thing that traders find difficult is the ability to use forex trading leverage. Using leverage allow traders to trade with more money than what they have in their account. Trading with leverage can increase the chances of making money, but the thing that is less spoken about is that it also increases risk for losses. Maximum of the new traders get optimistic and say, “But I could also double my account in just a matter of days.”. While it is indeed true that watching your fluctuating account is very difficult. Many people start trading assuming that they can handle but when they face such challenges they get to experience forex trading mistakes.
How Forex Is Different From Other Markets?
There are few major differences between forex and other money markets:
- Fewer rules: This means traders aren’t held to as strict standards or regulations as those in the stock, futures or options markets. There are no clearing houses and no central bodies that oversee the FX market.
- Fees and commissions: Since FX trades don’t take place on a traditional exchange ground, traders don’t find the same fees or commissions like on other markets.
- Full access: There’s no obligation as to when traders can and cannot trade. The market is open 24 hours a day and is trade-ready at any time of the day.
- Ease: Since it’s such a liquid market, traders can get in and out whenever they want and can buy as much currency as they can afford.
Winning at forex trading is an achievable goal if you get educated correctly. It is always better to practice on a forex trading demo first and start small when you invest real money. If went wrong analyse and move on from it. People fail at foreign exchange trading every day for lack of ability. If you have learnt to do that you have solved half of the success equation in forex trading.