Currency trading is a popular form of online trading that has strongly eclipsed stocks and commodities as the most traded market in the world. Focusing on the buying and selling of one currency for another, the foreign exchange (Forex) is where these trades takes place and allows individuals and brokers the opportunity to trade in international currencies using broker approved trading software and leveraged money to attempt to make their trading fortunes.
The Markets Are Volatile
The Forex market tends to be very volatile, in part because money is generally leveraged at $1 put in at position controlling $100 of actual currency. That means your $1,000 bet on a currency pair actually represents the buying and selling of $100,000 of actual currency. That means even the smallest movement in price up or down between the two currencies can lead to huge jumps in the market.
Trading Is Done In Pairs
In order to buy one currency, you must sell another, and vice versa. There are always two currencies involved, and well over 90% of all currency trading involves the big eight nations (as far as currency goes): The United States, Canada, Great Britain, European Union (EU), Switzerland, Japan, Australia, and New Zealand.
No Set Trading Floor
Unlike many stock markets, there is no set trading floor for the Forex. The market is open 24/7 online, and although trading of each individual currency tends to be hottest when that nation’s other trading markets are open, those currencies are still available to continue trading any time during the week. Since it is all done online and through online brokers, there is no actual physical location where trading takes place.
These are some of the basics you need to understand if you’re going to jump into the constantly changing world of currency trading.