Facilitated by many online tools and access to all, Forex allows you to invest small amounts by speculating on the relative value of currencies. For beginners, it is an easy gateway into the world of the stock market and is enjoying growing success.
Forex, also popular as the foreign exchange market, FX or currency trading, is a decentralized international market where all world currencies are traded. The Forex market is the largest liquid market in the world, with an average daily trading volume exceeding $5 trillion. All of the world’s stock markets are no match for it. But what does this mean for you? Familiarize yourself with Forex trading, and you may discover exciting trading opportunities not available with other investments.
If you have ever travelled abroad, then you have made a forex transaction. You go to England, and you convert your euros into pounds. In doing so, the forex exchange rate between the two currencies – based on supply and demand – determines how many pounds you are going to get based on your euros. And the exchange rate fluctuates constantly.
On Monday, one euro can get you 0.81 pounds. Tuesday, 0.80 pounds. This slight change may seem trivial to you. But think about it on a grand scale. A big international company may have to pay employees abroad. Imagine what your final decision would be if simply exchanging one currency for another cost you more depending on the timing? Those few pennies can cost you dearly. Either way, whether you’re a traveller or a business owner, you’d rather hold onto your money until the forex exchange rate benefits you.
Just like stocks, you can trade currencies based on what you think of their values (or directions). But the huge difference with Forex is that you can trade both up and down just as easily. If you think a currency will appreciate, you can buy it. Conversely, if you think it will lose value, it is advisable to sell it. With such a big market, finding a buyer when you sell and a seller to buy is much easier than in other markets. You may hear on the news that China is devaluing its currency to attract more foreign investors to its country. In case you think the trend will continue, you can make a forex trade by selling the Chinese currency against another currency such as the US dollar. The more the Chinese currency devalues against the US dollar, the greater the profits will be. If the Chinese currency appreciates while your short position is open, you better get out of the trade before you take too many losses.
To trade currencies, you will need a broker such as HubbleBIT. This brokerage offers a variety of trading instruments and accounts, so make sure to read HubbleBIT Review and get more info. Choosing a reliable brokerage is of utmost importance for investors and traders. These are not just intermediaries but also your mentors, advisors and partners in trading. Make sure not to leave this point to chance. Instead, do thorough research and compare several brokerages before opening an account.