the basics on how to get profit out of currency trading
How to Get Profit Out Of Currency Trading
Forex is the acronym for Foreign Exchange, which is the direct trading of currencies of different countries. Earlier, this type of trading in foreign exchange was limited to institutional traders and large banks. With the advancements in technology, smaller traders are able to take advantage of the several benefits of currency trading, simply by taking up various trading platforms, mostly online.
A floating exchange rate is used for the various currencies in the world. All currency trading is always done in pairs such as, Dollar/Yen, Euro/Dollar, etc. Trading of the major currencies takes up nearly 85% of the daily transactions all over.
Trading forex involves mostly four major currency pairs. These are US dollar against Swiss franc, British pound versus US dollar, US dollar versus Japanese yen, and Euro versus US dollar. In the trading market, they will look like USD/CHF, GBP/USD, USD/JPY, and EUR/USD. However, it must be noted that in forex trading no one pays dividends.
The basic pattern of making money out of currency trading works like this. If you think, one currency is going to appreciate over another, you exchange the second currency to obtain the first, and wait. Provided things go as per your estimate, you may eventually exchange this currency back to the first, collecting the profits in the transaction.
Dealers at major banks or forex brokerage companies perform the transactions on the forex market. In the worldwide market, forex occupies a necessary activity, which is carried out at all times. When traders in the US are asleep, dealers in Japan are trading currency with their counterparts in Europe.
This means, you are right in assuming the forex market is forever active the whole 24 hours, and dealers are working in three consecutive shifts. Clients can place stop-loss and take-profit orders with brokers for execution overnight.
Compared to the stock market, where the variations are sudden, and large jumps are often the routine, the price movements are far smoother on the forex market. A new investor can enter or exit the market without any major upheaval, since the daily turnover in the forex market is of the order of $1.2 trillion.
The Forex market is also known by many other different names like the FX market, or the foreign exchange market. The forex market, being one of the largest as well as the oldest financial markets of the world, never stops. It is also the biggest and the most liquid market known to the world, trading through the 24-hour day inter-bank currency markets.
When you compare the various markets, you will observe the futures market is only one percent of the forex market. Moreover, the stock and futures market are centered on an exchange. This is not so for trading currency. Currency trading moves from major banks in the US to New Zealand and Australia, then to the Far East, next to Europe and finally back to the US, going like a full-circle game of trading.