Trading is and will always be a lucrative business venture for many who are interested in commerce. One of the most profitable and worthwhile is currency trading or the buy and sell of currency in the foreign market or FOREX.
Getting to Know Your FOREX
Earning in FOREX can involve a high risk of loss if you are not knowledgeable about the process. However, knowing how it works and the very basic ideas can help you start. FOREX works when a trader buys a certain currency and sells it for another. As currencies are often paired together, it is easier for traders to know the value of the currency when converted to the other unit.
The value of the currency pairs are affected by many factors including economics such as inflation rate, unemployment rate, political events and other major events.
Benefits of Currency Trading
One of the reasons why currency trading is popular regardless of it being a high risk investment is that one can trade 24 hours a day which is not possible with stock trading. Forex is also accessible so one does not need to invest a minimum amount to be able to trade. Currency trading also offers a limited variety of instruments or pairs making it easier to track the movement of the pair. This can be a problem when one is dealing with stock trading as the stock market offers thousands of assets, stocks and other trading instrument.
Trading in the market is also easier as traders do not have to use a broker to purchase or make transactions for them thus eliminating commissions so everything that the trader earns is net profit. This might sound dubious for new traders; however, dealers who handle the trade earn not from the investor but from the bid-ask spread.
Understanding a Forex Quote
To start learning about currency trading, it is important that one learns how to read the FOREX quote which is shown mostly in all trading platform. In currency pairing, there are two currencies – the base and the quote. The base is usually the second one and is the worth of the first currency. So if one is interested in US/JPY pair, one reads it as it as 1USD is worth this amount in JPY. With regards to the bid/ask price, the bid price is the price that traders will have to pay; the asking price is then the amount you are willing to sell.
Is Currency Trading For You?
Currency trading involves a high risk of loss and as such, it might not be for all. It is therefore important that one learn everything there is to know about currency trading before they start. There are also some sites that do offer client suitability or risk appetite assessment which can help one decide what risks they are most comfortable with.