FOREX Trading is an act of buying and selling of different currencies. In a simple sense, it means an act of trading in currencies that help the buyer to either make profit or loss. It is one of the largest markets in the world with a daily turnover of more than $5.3 Trillion. The FOREX Market is a 2-Way Market which means that when you sell a particular currency there is always a buyer. Hence it is said that the currency is always traded in pairs.
Types of Currencies:
Every country has different currencies. But, one of the prime currency is called as the base currency, while opposite currency which is paired called as quote currency. There are basically three types of currency in the FOREX Market.
FX Majors: It is one of the most traded currency in the world with around 90% of trading is done in this pair as it composites the foreign exchange market. In this USD is a base currency and others currencies are quote currency. It is the most volatile and profitable currency in the world. With some of the major currency pairs are:
USD/EUR, USD/JPY, USD/CHF, USD/GBP, USD/AUD, USD/CAD, USD/NZD
They are regarded as safest and stable currency to trade as they are highly volatile and offers some of the tightest spread. It is a well managed and most regulated currency pairs that show an optimistic sign to trade.
FX Minors: It is also called as Cross Pair which doesn’t include USD Dollar in a picture. Previously even if you trade in the FOREX Market, you were automatically get converted into US Dollar but now it is regulated in exchange. Hence, you can trade this currency pair without having an actual need for the conversion. Some of the FX Cross pair are:
EUR/GBP, GBP/JPY, EUR/JPY, JPY/CAD
These Currency Pairs are typically less liquid, but still, they are more volatile than the FX Majors. It also best option to trade.
Exotics: They are typically the currency pair which is made of one currency pair while 2nd is mostly from the emerging economies. In Recent years, this has actually picked up trading.
There are sometimes considered as most risky to trade due to widespread and lesser amount of volatility. There is always an issue of liquidity but still, the times have changed faster and gradually picked up the pace.
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Where you can do the Currency Trading?
It’s a 24 Hour Market and can be traded anywhere from MT4 Platform. There is usually 4 major trading session one needs to take care of:
Hence, FOREX Trading is open through 24 Hours
What is Leverage?
Leverage is a kind of liquidity wherein you can crack up large deals without investing in any high trading session. You don’t have to invest entire money. Let us Give you an example: Supposing if you have invested $100 in one trading session and have a choose leverage of 300. Your investment goes up to $100 * 300 times which means you can trade for $30,000
If you are trading in the FOREX Market, You also need to take care that your broker should have negative balance protection
How FOREX Trading works better?
It is essential to know that FOREX Trading only works when there is a dealing take place. It is a systematic process of buying and selling one currency with another. FOREX trading is mostly for the free-floating currencies.
Let’s learn how you can make profits:
If you decide you want to trade in USD/EUR and you think USD might go up, so you buy after a certain time it has achieved the required target you sell that currency. You make profit adding how much leverage you choose. So if you are dealing or trading in FOREX, you are borrowing the first currency in the pair, while you can either buy or sell that currency pair. The FOREX is a US$5.3 trillion-a-day market where the liquidity is so deep that liquidity provider. Let say, if you are trading with the leverage of 300:1, you can increase the potential of profit by 300 Times.
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