The foreign exchange trading market is an exciting, interesting, fast-paced financial market. It is the largest financial market when it comes to the volume of trades undertaken on a daily basis. In the past, this was the domain of the large banks, hedge funds, corporations and wealthy individuals. The growth of the internet and technology has made it possible for the average individual to enter this market and make money.
If you had to follow the value of a currency pair on a daily basis, you will soon realise that the movements in value are extremely small. Most of the major currency pairs generally move no more than a cent per day which can be determined as a percentage shift of less than 1%. This means for you to make a decent return on your investment, you would have to make use of leverage to increase the amount you make on a daily basis.
Foreign Exchange Trading Leverage
In this financial market, you can obtain leverage ratios of as high as 200:1 if your trading value is below $50000, or as low as 50:1. If you wish to place a trade worth $100,000 and your broker requires 1% margin, you only need to have an amount of $1000 available in your trading account. This gives you a leverage ratio of 100:1. Many people see this level of leverage as excessive, but there are those who feel that it is not too risky because of the small fluctuations in currencies. You should determine your own risk levels before making use of leverage.
Ease of Trading
The available levels of leverage and the size of this market have contributed to its popularity. It is possible for you to open and close trades immediately at the price that you see on your screen. These trades generally do not carry additional transaction fees or commission.
Unlike the stock market where a single purchaser or seller is able to have a huge impact on the prices, foreign currency prices are not impacted in the same way. The size of the market makes it extremely hard for one person to cause a major movement in the prices of currencies.
This financial market has also gained popularity due to its trading hours. The market is open 24 hours of each day, for five business days per week. This allows traders the opportunity to trade whenever it suits them. It is possible to enter this market as a part-time trader because you are allowed to trade at any time. If you hold down a normal nine-to-five job, it is possible for you to trade either early in the morning or late at night and the facility to become profitable is always available.
To trade in this market it is vital to learn as much as you possibly can about the intricacies of trading before you start trading with real currency. You need to know the basics about forex as well as the more technical methods of analysis, development of strategies and exactly how and when you should be trading to make your trades profitable.
Get a free Forex PDF PLUS:
- 14 Video Lessons
- Free One-on-One Training
- A 5000$ Training Account
- In-House Daily Analysis
- Get FULL ACCESS