What is Forex Trading?
To get the answer of what is forex trading? One should know about forex exchange or forex market. There are many terms for forex market, like FX, forex, foreign exchange market, and currency market.
What is Forex Market?
To trade in different currencies there is a FX market that is a global decentralised or over-the-counter (OTC) market. This market check the foreign exchange rates for every currency. In this market, selling, buying and exchanging currencies at determined or certain price are included.
This is the biggest market of the world. In 2019, Triennial Central Bank Survey of FX and OTC derivatives markets presented a report that the daily trading volume for FX is around $6.6 trillion. The main investors or participants of this market are the larger international banks.
What is Forex Trading?
Now, we will discuss what is forex trading? It is simple trading done by traders on the exchange rates of currencies in forex market. It is done in the pair of currencies. Like, USD/ERO.
How Forex Trading Works?
The trading between multiple types of sellers and buyers is anchors by financial centres around the world. This trade continue for 24 into 7 for a week except the weekend.
It is like a selling and buying of different kind of securities, like stocks. Here the trading is done in pair of currencies. For example, INR/USD is pair where one can trade Indian rupees against U.S. dollar.
Let’s understand it with an example: let there is a exchange rate between the INR and the USD is 1 to 70. Then, one has to pay 70000 for purchasing 1000 USD. And after some time the rate reaches to 1 to 90. Then, one has to pay 90000 INR to purchase 1000 USD . Or we can say, one will get 90000 INR on the sale of 1000 USD.
What are the Effects of Leverage?
Leverage is one of the most important aspects of forex trading. It has vast effects over trading. Leverage gives benefit of purchasing multiple of actual investments of traders.
For example; if trader employ leverage of 30:1, then one can buy $30000 of foreign currency in just $1000. While, remaining funds will lend by brokerage firm for the traders.
This increases the intensity of profit and loss of a trader. Whenever there is hike in the percentage of a currency the trader will get intensified profit. Example, if there is hike of 10 percentage in USD then as per the leverage of 30:1, one will get $3000 gain. This will provide 300 times gain to the trader on investment of $1000.
Same is applicable for the loss too. If a trader employs leverage of 30:1 then on dip of 10 percentage of currency, in which the trader is dealing. Then, one will have to pay loan to the brokerage firm along with the entire investment of $1000.
How to Initiate in Forex Market?
After getting the answer of What is Forex Trading? Everyone is searching for how to invest in this market. Let me clear this doubt too.
Those who want to begin trading on forex market, can start trading by following given steps.
- First makes an account at an authorised and authentic forex broker .
- Downloads and installs the trading platform in devices with the help of broker’s trading software.
- This needs some minimal deposit as per the charges of broker firm. Most of the platform charging minimum of £50.
After this trader will allow to do trading on their devices. They have to trade in a pair of currencies. Before, starting trading in real, one can take a demo too. The demo is provided by almost every broker for the traders.
This is all we have for our readers related to what is Forex Trading? For more information regarding crypto market, stay connected with us on DeSoft Technology.