What is Forex Trading
Forex is the foreign exchange market or currency market. In the 4X market, one currency is traded for another. Some people who take part in this market are simply customers looking to exchange one currency for another – either because they’re going on holiday, or because they want to send a payment to a foreign country.
Other participants in the this market are interested in daytrading, or in trading currency on a longer term basis for profit. This market is one of the biggest markets in the world, with currency traders and daytraders watching even the smallest fluctuations in the 4X market and trying to take advantage of them.
The appeal of the 4X market is partly that it does not rely on inside knowledge. The fluctuations are driven by day to day demand, and it’s easy for anyone to get started trading on this market.
In the 4X market, currency is traded against other currency. Trades occur between individuals and FX brokers, brokers with banks, and banks with other banks. This market is open 24 hours a day, rather than opening and closing at set times as with other markets.
There is a bid/offer spread on currency traded on the foreign exchange market. This spread represents the difference between the asking price and the bidding price. The price difference can be fairly small on the wholesale market, but brokers are not regulated by the Securities and Exchange Commission, so they are free to use a bigger spread if they wish when selling to a normal retail customer. Even with this spread it is possible to do well on the 4X market if you respond to changes quickly.
There are many systems aimed at helping traders to make a profit in the foreign exchange markets. Some of those systems are designed around daily trades, while others are designed for people who want to engage in day trading.
Daytrading can be a risky venture but it can also be a profitable one. It is possible for people to work during the day and then trade FX on an evening, taking advantage of the global market. Those looking for a less risky venture can enjoy trading currency on a longer term plan, and enjoy a long term return on their investment thanks to the general upward trend in currency value of some of the more popular currencies. Many traders make use of margins and leverage to allow themselves to trade in high volumes. This can be risky if the value of the currency goes down, but can offer bigger returns if the value of the currency increases.
Some popular forex systems include the Stochastic Indicator trading system, the Fozzy trading system, and systems that rely on the Fibonacci methods. It can take a long time for a novice to become confident in, and comfortable with, forex trading systems. Generally, novices are advised to try systems for a month or more in a demo account before applying them to their live accounts.
Forex brokers offer a range of software for traders to use to interact with the markets. The most popular software is Meta Trader 4, but browser-based clients are common too. These clients can be configured to offer reports and overlays that will help traders to apply the system they are using.
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