SHARETIPSINFO >> Articles Directory >>Currency trading and its advantages
Forex market or the Foreign Exchange market is the biggest in the world. If we consider the global Forex market the daily turnover is more than 3 trillion US$, which is more than the cumulative turnover of all the stock exchanges in the world. There are so many reasons behind this mammoth growth of the Forex trading or currency trading. Highest leverage rate, round the clock trading hours and of course huge profit potential is some of the most prevalent reasons for popularity of the currency trading. The significant players of the currency trading market are central banks, corporate banks, financial institutions, funds and brokers. The major portion of the currency trading is done by these institutions and individual investors trade in the currency market through these brokers.
Currency trading is done on the basis of the up and downs of the currencies in respect to the other. To out is simply for currency trading is done by investing in certain currency pairs. Though there are so many combinations of currencies in the world, there are seven major currencies that are most widely traded all over the world. While investing in the currencies you have to except the bid and ask price that is offered by the broker. While trading at the Forex market traders actually buy one currency in relation to the other. The base currency is the currency that is the basis of the trading. Generally a specific amount of base currency is bought by the trader and while selling the position the same amount of base currency is sold. The profit and loss of the trade is determined by the variation of the price currency in respect to the base currency. For example you have invested in the Forex market for the USDEUR currency pair. That means the base currency is USD and you are buying a specific number of USD, say 1000, as against EUR. When closing the position the same number of 1000 USD will be sold and the profit and loss will be determined on the valuation of EUR for USD 1000 while buying and selling the position.
The international currency trade is governed by so many factors and there are three most prominent factors that influence the Forex market at the most. These are the economical scenario, political position and market psychology. The economy of a country is the most crucial factor for the valuation of the currency of that country. If the indicators of economical growth like GDP, retail price, employment, import export, interest rate, foreign exchange reserve, balance of payment of the country show that the economy of the country is stable or growing steadily, the currency of that country will rise at the international market. On the other hand if these factors indicate that the economy of the country is declining the demand of the currency of that country will fall in the Forex market. Apart form the economical factors the political stability of the country and economic policy and foreign policy of the country also play a vital role. These factors are integral part of the economy of the country and hence these factors indirectly affect the currency of the country at the Forex market. Besides these factors that are related to the specific countries the general trend of the Forex market and the buyers psychology about certain currency is also instrumental for the rise and fall of the currency at the Forex market.
Though currency trading is considered to be one of the most potential investment proposition for so many reasons, there are considerable amount of risk involved in currency trading. According to the Forex brokers 99% of investors suffer loss at the Forex market. There are certain issues that are crucial for making profit at the Forex market. Selection of right broker, having access to an effective automated Forex trading system or Forex robot and ability to take timely trading decisions are instrumental for your success at currency trading. While trading at the Forex market you should always remember that Forex market can give you good returns as well as can ruin your investment. So it is essential that you take every trading decision carefully and after considering all the possibilities.
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