The market in which foreign currencies are traded is called foreign currency market. This is the world’s largest financial market and almost 4 trillion dollars of currencies are traded on a daily basis in this market. The market is continuously growing and more and more investors are attracted in the field of foreign currency trading online. The foreign currency market is not only the biggest financial market but it is also one of the most liquid markets in the world because of this high volume of trade. This market is equipped with many features and provides a lot of benefits to the traders. This market is both decentralized and over-the-counter and specializes in trading different types of currencies in pairs. It includes both financial institutions and individual traders from all over the world who are speculating in the movement of prices of the currencies in pairs.
What are the basics of foreign currency trading?
It is now important to understand how transactions are conducted in the foreign currency trading market. The instrument which is traded in the Forex trading is currency pair. This means the rate of one currency in terms of other currency. The most common types of currency pairs traded in the Forex world are-
Majority of the transactions in the Forex world is carried out in terms of these currency pairs. In every currency pair the former is termed as base currency and the later is quote or the counter currency. For example in EUR/USD currency pair price 1.251 it means that 1 single Euro requires 1.251 USD for exchange at present.
This is also known as margin trading and it involves trading higher amounts with low marginal deposits. The remainder of the trading amount is granted by the broker and the trader needs to deposit only a small portion of the total traded money as margin. Some Forex brokers provide leverage as high as 400:1. This means that you are able to trade with 400 USD with only depositing 1 USD as the margin money. But in leverage foreign currency trading, it is important to keep your risks low and high leverage ratios are generally not recommended to avoid risk-free trading online. If things go well you can obviously trade with high profits but if anything goes wrong you need to lose all your margin money and your losses are big. So leverage has to be taken wisely and it should not be high without planning.
How to trade foreign currency successfully?
It is always important to first learn Forex trading online at https://www.xtrade.com/ if you are a beginner. You need to open a demo account with a reputed Forex broker. Demo account is recommended because you trade with non real money and therefore you do not fear the losses while you trade freely learning the various strategies of successful foreign currency trading. After you learn and develop as a confident trader, you can switch to live currency trading account.