The foreign currency market (Forex) is the largest and most traded market in the world and trillions of dollars worth of transactions are made on a daily basis. While Forex was once the realm of the multinationals, hedge funds and the like, online trading platforms have opened the doors to individual traders who are hungry for a piece of the pie. Forex trading holds the potential for huge profits and so if you are thinking of investing, what do you need to know.
How Forex Works
Forex works by trading currencies in pairs and so for example you may look to trade the euro against the dollar (EUR/USD). If you think the euro will go up in value against the dollar you may decide to buy the euro and, if indeed, the euro does go up, therein lies your profit. The concept is relatively simple, however the trick to being a successful Forex trader is knowing which currencies to buy and when to buy them.
In order to actually execute trades, you’ll need an online trading platform. Hantec Markets are a well established trading broker who are regulated by the FCA and registering a trading account with them means you can access an online trading platform from which you can trade Forex. Once familiar with the platform executing Forex trades is easy, however, there are some other factors you will need to take into account.
Much of the jargon you will need to know before you start trading Forex is generic to all of the financial trading markets, for example “shorting” a term used to describe a trade that predicts that a certain stock will fall in price. Forex trading does, however, have some terms that are specific to it, a pip for example means percentage in point and refers to the smallest increment that the a currency can rise or fall by. The currency types have nicknames “the greenback” is the US dollar and the “Aussie” the Australian dollar, learning the jargon will help you navigate the markets more easily and with more confidence.
With Forex trading knowledge of the wider political and economical landscape is critical. Currency rates move up and down on the back of global news and events, So, for example, around the time of the Brexit vote, Forex traders were speculating on the outcome of the vote, some predicted the UK to remain in the EU and so may have invested in the pound, while others predicted the UK would leave and may have bought the euro. In that particular instance the vote didn’t go the way most people thought it would, but bear in mind, with Forex trading insider trading is permitted and so if you receive information ahead of the crowd, it could be your ticket to fortune.