Forex, or foreign exchange market and sometimes called the FX or currency market, deals with the global movement of currencies. The participants in these trading processes are typically the big banks. This is open 24 hours for every single weekday of the week. Traders deal with the different currencies in the different parts of the world using the best Forex trading strategies.
On a larger scale, Forex operates on different layers. From the bigger financial institutions dealings goes through the dealers that proactively trades foreign exchange. These dealers can be smaller bank institutions or they can be insurance firms or other types of financial company.
As for business owners, foreign exchange works as a safety net for business owners. This process is done through locking in a fixed rate until the trading of commodities is done after a few days. This is to allow both companies very minimal loss, just in case.
How is it possible that people are now able to trade currencies?
It was mentioned earlier that Forex usually involved bigger banks and financial institutions. Then how come people who do not own a bank are able to participate in Forex? This was made possible because of the internet. Platforms were created so that people from the different parts of the world can have access to the data regarding foreign exchange. This opened an avenue for retail Forex trading.
The Major Players in Forex
When compared to stocks, where stocks have an endless list of products and brands, Forex traders usually only follow the major currencies that usually affect the world market as their forex trading guide. These are as follows:
- United States
- New Zealand
- United Kingdom
Some of the Market Concepts
There are several approaches to trading, whether it is in Forex or stocks. The best forex trading strategies depend on your goal and what your goal is and how comfortable you are with a certain approach. It is best, however, to get more information about these different approaches so you can choose whichever suits you best.
In addition, keep in mind that in foreign exchange trading, you are selling a currency to purchase another currency. So say for example, you have a Japanese Yen in your portfolio and you want to purchase US dollar currency. You will need to take some or all of your Japanese Yen, in exchange to US dollars. And when you change your mind and you want to buy back the Japanese Yen because you see a good and better potential, you will have to use your US dollars to buy the Japanese Yen. With that being said, a forex trading will have to include two currencies because you make your earnings from the differences in the value between two currencies.
Another approach traders do which is typically recommended for new traders in forex is leveraging the returns. When done properly it doubles up your investment after a certain period of time. For example if there was an investment of $5,000 with 100,000 shares for USD/JPY and you got a yield of 7.5%, a foreseen 10:1 leverage would yield to a total of $3,760 every year. An amount that is a lot higher versus putting your $5,000 in a bank which is expected to earn a total of $250 a year.
With the best forex trading strategies shared with you, are you ready to start trading today?