Forex : is the regular exchange of one countrys currency for that of another
. This market of exchange has more volume from both buyers and sellers than any other in the world. The Forex trading is open for 24-hours a day for taking place in the major financial institutions across the globe.Currencies are quoted in pairs.
Initially currency is listed and it is termed as base currency. The second is called as counter or quote currency. When coming for wholesale market currencies are quoted into five significant numbers and it consist of last place holder called a point or a pip.
Forex market is one of the most popular markets for speculation due to its enormous size, liquidity, and tendency for currencies for moving in strong trends. An enticing aspect of trading currencies is the high degree of leverage available.
Advantages:
Leverage: Huge leverage is available in Forex trading, up to 100:1 meaning that large profits will be generated from small margin deposits.
Liquidity: The enormous size and global trading in the Forex markets tells that the markets in the major currency pairs are very liquid by making the trade executions almost instant with little slippage.
To go short: Always this currency trading involves on buying one currency and selling another, there will not be a structural bias to the market. This means that a trader has equal potential to profit in a rising or falling market.
Trends: In fundamental, the value of a countrys currency is determined by interest rates and the strength of the economy in relation to other countries. Currencies have a greater tendency to trend until the fundamentals change.
Disadvantages:
Leverage: Huge leverage is available to Forex traders and the danger is in the positions which carry too much risk for the account size which leads to the margin calls. It is adhered with effective money management rules. Brokers: Retail traders must opt a broker rather than dealing directly in the inter bank market. The broker will be the counterparty in all transactions and they make the market effectively. They can widen spreads or even refuse to trade during volatile trading conditions. It can be avoided for dealing brokers and it comes for alternative Forex which is used futures.
Spreads: The retail trader should use a broker to trade since they are not able to deal at the inter bank rates. A broker quotes a fixed spread of 3-20 pips depending on the currency pair.
Forex is a very large market for most retail traders which deal with brokers. Online futures trading provide much more level playing field for most traders who want to take part in Forex trading.
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