What You Need to Know About Forex Trading

17 Jan What You Need to Know About Forex Trading

What is Forex and Forex trading?

Forex, short for foreign exchange, is the market in which foreign currencies are traded or exchanged. It is an online market in which currencies are exchanged at the current or predetermined prices.  Traders of forex can keep currencies at a low price and sell at a higher price for profit. When investing in forex, it is crucial to follow the news, locally and internationally, to determine the effect current events will have on your investment.

When dealing with forex, a broker would be used to assist in trades and offer leverage. Therefore, with regards to forex trading there is always a degree of risk involved as you are constantly watching your trades and the factors surrounding them. However with great risk, great reward may follow.

Growth of Forex in recent years

The forex trading market has escalated to a daily trading value of over $5.1 trillion as of 2016. Forex dealing started in 1971, where the trading market at the time needed to be monitored every minute of every day. This could be because of different time zones, or traders needing to monitor trades frequently in order to have a larger profit. Forex trading started for business trades in 1971 and since the emergence of internet, has allowed any individual with capital to enter into forex trading.

Current trends

Before you start trading, make sure you are aware of the currencies current exchange rates over a period of time beforehand. Many Forex trading platforms also provide you with charts and graphs to show a general trend between currencies, although things like current affairs between countries can affect this, such as trade disputes.

With regards to changes in market value of trades, they can be neutral, even though the trade value has not changed over a period of time. Another option could be that a drop has occurred in the value of the trade, or bullish where the trade has increased in market value.

An example of a bullish trade currently is the trade of the Great Britain Pound (£) and the Australian dollar (AUD) which has a greater market value from 1.7131 to 1.7004. It may seem like a drop in value but in fact is a good time to start trading while the value is low, to eventually sell high with leverage attached and achieve a large profit.

Conclusion

The foreign exchange market is definitely something that is worth trying. Even if you are not ready for full commitment or sceptical of investment, you can still try the free demo accounts offered on platforms, such as TraderVC, to become acquainted with the market. There are many fakes and scams out there so investor beware. Prior to investing, you should ensure that the platform that you are using is legitimate.

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