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The Basics Of Currency Trading
  • 30 Jun
  • 2017

The Basics Of Currency Trading

Recommended : Eight Forex Terms You Should Know About Before You Start Trading

Investment markets are quite risky and it is known to quickly gulp down the money of the investors who see trading as one of the simple things. Lack of knowledge and practise can make trading in any investment market a lot tougher.  

The forex trading is undoubtedly the biggest investment market in the world today. According to a report, on April 2010, the forex market reached approximately $4 trillion in daily average turnover, compared to 25 billion of daily average turnover on the NYSE.

The currency market runs 24*5 and is closed from Friday evening to Sunday evening, however, the 24-hour trading session is sort of misleading because European, United States, and Asian trading sessions are the three different trading sessions.

The currency is traded in various lots. A micro lot represents 1000 units of a currency. Simply said, a micro lot represents $1,000 of your base currency, a mini lot is 10,000 units of your base currency and a standard lot illustrates 100,000 units (if your account is funded in U.S dollars).

How It’s Different From Stock Market?

All forex trading is done in pairs, unlike the stock market where you can either sell or buy a single stock. A trader is required to buy one currency and sell another currency in the forex market. Almost all currencies are priced out of the fourth decimal point. A pip is the smallest increment of trade. However, some currencies are subject to considerable leaps in single session, causing serious losses to the small investors. 

Easy management

In comparison to thousands of stocks that are available in the global equity markets, the majority of the volume in currency trading is confined to only 18 currency pairs. Having far less trading options in the forex market makes the trade and portfolio management an easier task, although nobody would say that currency trading is easy.


How Currency Moves?


Although, stock market and forex market are affected by different factors, but there are some similar forces that move both the stock market as well as the currency market. One of the major factors which greatly affect the forex market is supply and demand of the currency in the trading market. To put it in simple words: the value of dollar decreases when there is too many currency (dollars) floating in the market, and the value of dollar increases when the world is in need of more dollars. And of course, other factors like interest rates and geopolitical tensions are known to affect currency prices sometimes.
 

It Is Easier Said Than Done

Learning about currency trading is relatively easy but finding the right trading strategies takes a lot of practice. Most forex brokers help the forex traders in opening a free virtual account which allows trade with virtual money, giving you a lot of time to practice and get your concepts or strategies right.
 

Happy Trading !!

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