Trading currency refers to buying and selling currency on the Foreign Exchange Market. The Foreign Exchange Market, also known as the Forex Market or the FX, focuses on international currencies and is the world’s largest and most accessible financial market. The Forex Market consists of around $2 trillion in its daily volume. The Forex Market specifies the comparable values of global currencies. It decides the value of one currency against another currency. With Forex trading you can trade 24 hours a day and chose when to trade, how to trade and what currencies you wish to trade in. Trading currency has always been the domain of large financial companies and organisations. However, since trading currency became available online is has been popular and available to the every day trader.
When trading currencies, prices are commonly quoted in currency pairs. A currency exchange rate is determined by the price of one currency exchanged for another. This term refers to the rate of exchange of two currencies. For example, EUR/USD which represents the Euro and the US dollar. The former currency is known as the base currency and the latter currency is known as the counter currency. Exchange rates alter depending on economic influences, industrial production and political events. You can decide as a trader whether to ‘go long’ or to ‘go short.’ A common currency trade is based on choosing to buy a currency, in the belief that the first currency will increase in value against the traded currency. Ultimately, your aim is to profit from the exchange rate. The most popular traded currencies include the Euro, the Pound, the Canadian Dollar, the Yen, the Swiss Franc and the US dollar.
When participating in trading currency it is common for a currency pair to be quoted with a bid price and an ask price. The bid price is the lower price, which you should sell at and the ask price is the price at which you should buy at. The ‘pip’ is the price interest point which is the minimum incremental move possible by a specific currency pair.
Trading currencies is different from other forms of trading as it is not based on a regulated exchange. It is not effected by a central governing body, instead all traders enter into investment with independent credit agreements. You can choose the own size of your position (when buying or selling), there are no limits. The Forex Market has no commissions and is a principals-only market. Trading currency with the Forex Market is based on speculation, you do not enter into physical exchanges of currencies.
When trading currency with the Forex Market you are not required to pay a full deposit, you only have to pay a margin deposit. This is because the Forex Market is leveraged and based on margin trading. Margin calls exist in the event that the balance of a trading account falls beneath the margin. At this point trades will either be sold off or the margin price has to be re-evaluated.
Risk warning: Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.