What is forex trading?
Forex trading is a term that many people have heard used but do not really understand. Put simply it is the buying or selling of currency with the aim of making a profit. The profit is made by predicting the appreciation or depreciation of different currencies.
How does it work?
Unlike the stock market there are no formal exchanges where trading takes place. Instead trading is what is known as OTC (over the counter). This simply means that deals are done directly between buyers and seller of a currency. However in reality banks, brokers and other institutions offer private individuals foreign currency trading facilities at extremely low prices.
Why trade in Forex?
One of the best reasons to trade Forex is particularly relevant in today's economic climate. Unlike the equities markets foreign exchange markets do not have trends. Currently global equities markets are on a downward trend with many of the worlds major stock indices falling. This does not happen in foreign exchange markets the reason is simple - every forex transaction has two parts. When you buy Japanese yen, by default you are selling US dollars. -n other words as one currency falls, another will rise
As an investor what this means is that in the forex markets there are always opportunities to make money, no matter what the economic climate is like.
Another great reason to trade forex is the liquidity of the market. The Forex market is the biggest in the world meaning you can always buy or sell any currency. In addition because of this it is possible to automate your trading in some cases with the help of computer software.
How can I find out more?
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