What is Forex Trading? A Brief Introduction

Freedom is not just a trading software that allows you to automate your trades. We aspire to become your single source for everything related to trading. You must study the fundamentals of Forex Trading before you can begin, including what markets are involved, how it operates, tactics, and potential advantages and disadvantages.???

In our previous article, we had discussed about Day Trading. Here we will shed light on Forex Trading!

The Forex Trading is the marketplace for trading foreign currencies, and it is also known as Forex Exchange Trading or FX. Let’s begin with this blog, keep reading!?

What is Forex Trading??

Forex Trading is very similar to the currency exchange when you visit abroad. When a trader buys or sells any currency, the exchange rate changes continuously because of supply and demand.??

The Forex trading is not supposed to be done physically and it is done electrically Over the Counter (OTC) 24 hours a day, from Monday to Friday. The Forex Trading, investing and managements get rise because of the unusual changes and performance in other marketplaces.??

How Does the Forex Trading work??

Globally, The FX market is defined as the only continuous open market. In the beginning, the forex market was drove by the banks or institutional firms. However, in recent years it has become more retail-oriented for investors and traders of every size.??

Where does its office locate??

As discussed earlier that the forex trading works without actual building structure, but it is done electrically through a series of linked computer networks and trading terminals. If you want to participate in forex market, you do not need any nationality. Investment and commercial banks, institutional firms can also participate from all over the world.??

Who Trades in the Forex Market??

Trading in currencies was most difficult for individual investments before the era of internet. Many multinational firms, high-net worth individuals (HNWIs) were the traders because of the high capital requirements in forex market.????

Various investment and commercial banks can do forex trading on behalf of clients. This currency trading is also available for both retail and professional investors.?

3 Different Types of Forex Market??

Forex trading is not only about the exchange of currencies but some of the main functions of FX trading is to keep an eye on future price fluctuations. The forex traders play safely as they aim to buy those profit giving currencies and sell currencies with low profit ratio in near future.???

Let's discuss the three different types of Forex Markets having their own diverse objectives.??

The Spot Market?

In this market, you can buy and sell currencies with the real time exchange rates. This is determined based on supply and demand. The exchange rate is calculated on different factors:?

• Profitability?
• Current Interest Rates?
• Geopolitical sentiments?
• Price Estimation?

The Future Market?

This is another market when you can do forex trading. It is a standardized agreement between two traders to buy and sell predetermined currency price with specific exchange rate on the future date.? This contract contains many details including quantity of units being traded, non-customizable prices and delivery time. These agreements are bought and sold on settlement date on Public Commodities Parties such as Chicago Mercantile Exchange (CME).???

The Forward Market?

This is a private agreement between two parties. In this market the traders have option to lock I an exchange rate for a predetermined amount of currency at later time instead of executing a trade at that time.??

Understanding of Forex Trading Strategies?

?Before understanding the strategies of forex trading, find the two forms of forex trades named as long and short. In long trade, the traders or investors bet that the currency price will increase, and they would get profit from it. Whereas the short trade is opposite to it in which traders bet that currency's pair price will decrease.??

The four main strategies of forex trading are discussed under:?

• Getting into the first strategy that is a scalp trade. It consists of accumulative positions that are held for little longer than a few seconds or minutes, and the profit margins are constrained in terms of pip values.?
• ?Short-term trades known as day trades involve that the positions are liquidated and held on the same day, and it may last for hours or minutes.????
• Another strategy named as a swing trade, in which a trader holds the position for several days or even several weeks.?
• ?In a position trade, the trader keeps the currency for a longer period that is for months or even years.?

Benefits of Forex Trading?

When an individual starts forex trading, the first question that pops up in everyone’s head is that what will I get from this trading? Would it be beneficial for me or not? The answer is yes, you get benefited from forex trading in different ways. Let’s discuss some benefits:?

1. You can trade 5 and a half days a week, 24/7.?
2. Forex trading is largest in the world in terms of daily trading volume,?
3. You become able to multiple your starting capital.?
4. You can practice risk free trade with your demo account.??
5. It has no hard and fast rule, you can easily follow the same rule as standard trade.?
6. ?You work in more decentralized market than conventional stock or bond markets.?

Is Forex Trading safe? Understanding the Risks

Risk Associated with Leverage: As the word leverage shows ‘’Favor’’ so it can be positive or negative. The leverage in trading can affect your trading results. Because higher the leverage, the larger your profits and losses would be.???

Interest Rate Risk: If the interest rate in a country’s increases, the currency may appreciate. The increase in strength can be linked to a surge in investments in that country’s money markets because better returns are possible with a stronger currency and vice versa.??

Transaction Risk: This exchange rate risk can happen at any time during a contract. The currency rates may change over 24-hours. Keeping it in mind that the greater the time difference between entering and settling the contract, the larger the transaction risk.?

Final Words?

In summary, the Forex Trading is way more easy than other stock exchange markets for traders and investors and even for individuals with minimum capital. Focusing on comprehending the macroeconomic principles that underpin currency values and having prior knowledge of technical analysis may assist new forex traders increase their profitability.?

For changing your lifestyle, Start trading now!??