Foreign exchange refers to the currency of a country in terms of another country’s currency. A foreign exchange market allows traders to trade between currencies of different countries. Currencies, of course, are not tangible assets, so traders do not aim to keep it in their possession for a long time. However, they want to make profits from the fluctuations that decrease or increase a currency. Several factors (economic, political, social, financial) can have an impact on the particular country’s currency while some factors take a toll on currencies all around the globe. Foreign exchange is also called forex in short. Online forex trading, thus, is the place where you can buy and sell units of the currencies of any country in the world. One striking feature that sets the forex market apart from other financial markets is that this is open all day, that is, 24 hours and 7 days.
Benefits of Online Forex Trading:
Apart from being active all day, the forex market offers some other benefits to people who trade in currencies.
- While equity markets used to work even when the world was not so technologically developed, forex markets did not. Things going online has had a great impact on the forex market and it is not easier than ever to trade forex.
- Traders can earn not only when the prices of the forex increase but also when they fall.
- The centralization and transparency of the forex market make it easier for traders to earn maximum returns even on minimum investment.
- More than sixty currency pairs are available for traders on the market. It allows you to have a varied spectrum of choices and put your money wisely.
Terms Related to Forex Market:
Before investing in the foreign exchange market, you should know some of the popular terms that are used in the market, so that you can understand what is going on in the market and with your money.
- Spread – The difference between the bid (selling price) and offer (buying price).
- Price interest points – Also called pips, these points are the digits after the decimal point in a number. These points help you measure the variations in different currency pairs’ exchange rates.
- Lot – A lot consists of a standardized number of units of forex so that the trader buys at least one lot of the currency pair.
- Stop order – This kind of order allows you to stop your losses. You can direct the forex market on the maximum amount of loss you would be willing to bear if a stock goes in the opposite direction than what you expected.
How can you trade?
If you are a beginner, you can start with a forex demo account. Many beginners who do not have any practical experience in the financial markets take their first step in the world of markets with a demo account. With this account, you can check daily updates of the market, invest money in forex, and try your strategies to earn maximum profit but the money will not be yours. This will be a dummy account, giving you dummy money, which you can try on currency pairs, learn from these mistakes without losing your own money, and then start investing in the real market.