The currency trading market may not get as much attention as the bonds or stocks markets, but it is the largest financial market globally. It undertakes transactions worth more than $4 trillion each day.
This market allows you to trade money. You have the facility to buy and sell money. This is not done through a centralised exchange. Your trading is done through a range of financial centres. The market is available to trade 24 hours of every day, for five business days. This means that you will be able to find a dealer who is willing to buy or sell currencies at any time of day or night.
This market has become more accessible to the individual, due to the advancement in trading technology. The currency trading market used to be the domain of governments and large companies with a lot of wealth. The widespread use and access to the internet has made it possible for the individual to enter the market. This makes it simple as all you require is a computer and a stable internet connection.
Currency Trading Differences
The forex market is unique and differs from other financial markets in many ways.
- Trade At Any Time
The forex market trades all day and night, so you can trade at any time that suits you. If you are an insomniac, you have the opportunity to trade all night, based on the currencies you are trading.
- No Commissions Payable
In the forex market, you will not be charged clearing, brokerage or exchange fees. Forex brokers make their money on the variance between the price you pay to purchase and the amount you receive when you dispose of your currencies.
- Not As Many Rules
Currency trading does not take place on a centralised exchange, such as the New York Stock Exchange. There is no central body governing the transactions. There are no clearing houses to ensure that the entity you are buying from pays the account. In this market, insider information can be used, unlike on the stock market where you would have to face legal implications.
- Ease of Entry and Exit
The liquidity and size of this financial market makes it easy to enter and exit trades. You will not experience a problem to buy or sell currencies at any time.
- No Limits
There are no limitations on the amount you can trade. If you had $1 billion you wanted to trade, you can do so.
Profits or Losses from Currency Trading
By the conversion of your money into another currency, you are placing your hopes on the currency you purchased to rise in value. This means that when you convert the foreign currency back into your initial currency, you would have made a profit.
An example to illustrate this is if you have $900 and you exchange it for AUD1000. You hang on to your position for a week and by this time the AUD/USD rate has increased to 1.000. This means that the Australian dollars you have purchased have gone up in value compared to the US dollar. If you had to get rid of the AUD to USD, you would have USD1000 in your hands. This indicates a profit of USD100, since you started with USD900 and you now have USD1000.
Get a free Forex PDF PLUS:
- 14 Video Lessons
- Free One-on-One Training
- A 5000$ Training Account
- In-House Daily Analysis
- Get FULL ACCESS