Introduction to Currency Trading

The foreign exchange market is also known as Forex or FX in short. It is one of the most growing, liquid, interesting and fast paced markets in the world. Until recent years the Forex trading had been dominated by large financial institutes, large multinational corporations, and central banks of countries, hedge fund institutes and extremely wealthy individuals. But, the advent of internet changed the currency trading scenario. It made possible for small and retail buyers to buy and sell currencies through brokerage accounts.

If you study the average currency fluctuations that happen every day, you would find that it is usually a tiny amount. Mostly the currency pair doesn’t change more than one cent per day. It makes the currency market one of the least volatile markets around. For this reasons the traders heavily rely on the huge leverage to increase the value of currency movements. The leverage that a trader can use for trading currencies can be as large as 250:1. However, the higher the leverage gets, the riskier it gets. Higher leverage makes movement larger for currency traders because the currencies are traded round the clock, five days a week and have high liquidity.

The currency market is determined by the supply and demand of a currency and is not very easily manipulated. That’s why even the major players of the market cannot move the currency prices as per their whim. The reason for growth of currency trading in recent years is the extreme liquidity and the high leverage option that a trader has.

The Forex market is very lucrative, but in order to be able to reap the benefit of Forex trading, a trader must be well versed with the basics of currency movements. When the foundation of an investor’s understanding of the currency market is strong they can gauge the situation of the market and take appropriate decisions.

So, before you take the plunge and start currency trading, make sure you have your basics of currency trading right. If not, it is advisable to invest some time in learning the various strategies and secrets of currency trading and then start with it slowly and with caution. Remember as high are the rewards of currency trading, so are the risks.