The Foreign Exchange Market (FOREX) is the largest financial market in the world. Foreign exchange involves simultaneous buying of one currency and selling of another. Currency is traded in pairs. This means that one currency is traded for another. It is fast gaining popularity nowadays because it is an easy and fast way to earn money. Simply put, Forex comprises of four variables: currencies, exchange rates, time and interest rate. The way these components correlate provide small investors with a return on their investment that they can not find in the more traditional trading options.
Major currencies traded in the Forex market
The major currencies are
1. USD - United States Dollar
2. EUR - Euro members Euro
3. JPY - Japan Yen
4. GBP - Great Britain pound
5. CHF - Switzerland franc
6. CAD - Canadian dollar
7. AUD - Australia dollar
Types of investors in the Forex market: There are 2 types of investors involved in the FOREX market.
1. The hedger: The hedger is involved in International trades and uses FOREX trading to protect his interest in a transaction from currency fluctuations.
2. The speculator: The speculator is the type of investor who invests in currency only for profit motive.
Reasons for investing in the Forex market: There are many reasons why investors are taking a keen interest in Forex trading. Some of the reasons are:
1. Ease of opening an account
2. No middlemen
3. Low transaction cost
4. Superior liquidity helps ensure that you can execute trades at a fair price.
5. Quick transactions
6. Low margin / High leverage
7. Forex never sleeps. It is a 24 hour market
8. Accessibility through online trading platforms
9. Never bullish or bearish market.
10. No particular entity can control the market
11. No fees
12. The four most frequently traded pairs (the U.S. dollar, the yen, the Euro and the British pound) are never without buyers and sellers.
Reasons for Currency prices fluctuations in the Forex market: Currency prices fluctuations in the Forex market are due to many economic and political factors which are
1. Political scenario
2. Interest rates
3. International trade
4. Rising prices
Online trading: For those people who are interested in online trading, Forex trading is becoming very popular. Traders can make some gains by using their computers. By constantly monitoring the changes in currency trading market, traders can make a lot of money within few minutes. Below are some tips to help you while dealing in the Forex market:
Always buy when currency is low.
Invest wisely by not investing more than you can afford to lose.
Familiarize yourself with the currency, the terms used in Forex trading and the rules of Forex market.
source: folsol.com