What is FX trading?
Currency
trading (or FX
trading) is the act of exchanging one currency for another
in an attempt to create a profit when exchanging it back at a
later time. The FX trading market is the largest trading
market in the world, trading 1.9 trillion dollars daily.
This gives the investor a very high liquidity, and in turn, quick
execution. This, and fact that the FX market trades 24 hour
a day, makes FX trading attractive to the potential investor.
Since the first brokers used the internet for instant execution,
smaller investors with a smaller capital (as little as 250 USD)
are able to participate in FX trading, which before was reserved
for larger institutions such as banks. The participating
public has grown since the birth of online FX trading, and shows
no end in sight for an emerging and lucrative investment opportunity.
The currency market is a very unique
market; it offers many conveniences in a high leverage environment.
The trading volume of the FX trading market exceeds any other market
in the world, as does its total daily money traded (1.9 trillion).
Because the market has the highest trading volume, trades can be
executed in a quick OTC manner. This, and the Internet, give birth
to online FX trading which allows traders to quickly buy or sell
currency on a small amount of money at a high leverage (1:100
usually) in an attempt to make a profit when trading it back at a
later time. Leverage can be a bad thing too; FX trading is
considered to be very risky by many because of the tremendous losses
that can occur. High leverage in FX trading makes it a double edged
sword, because as the winnings are amplified, so are the losses.
Steady, consistent wins are generally accepted as the best method in
succeeding in FX trading, as even the smallest string of losses can
lead to bankrupting an account.
Many things effect FX trading, but
almost always boils down to simple supply and demand. In each of
the currencies nations, small fluctuations of supply and demand as
well as economic news and releases effect the price of each
currency, making it a volatile and ever changing market. The
economic factors that effect FX trading can be anything from a news
release to a large price action caused by a major buy or sell of a
specific currency (Bank of Japan intervenes the yen regularly).
Also, other economic events such as inflation or trends make an
impact on FX trading. A currency may lose value due to rising
inflation rates; purchasing power would plummet, causing the
specific currency to be worth less. FX trading is very fickle in
this respect, so great care should be taken in researching each
trade before execution.
Since FX trading became available to
the general investing public, many techniques and indicators have
been used in order to be able to trade currency efficiently. One of
the more popular methods of FX trading is using a programmed trading
system (or algorithm). This algorithm is coded into a trading
platform, and trades are automatically taken according to specific
written rules. Many investing firms with their hands in the FX
trading market use these robots to trade on a historically proven
system. This will give their clients a set rate of return, with a
proven track record.
FX trading has the potential to be one
of the most lucrative forms of investment of our time. It offers 24
hour trading conditions coupled with almost instant execution via
the Internet, a high leverage for bigger returns, and many different
platforms to be able to write your own algorithm for an automated
trading system to achieve steady returns like the bigger firms.
With many brokers attaining high status quickly from the FX trading
boom sweeping the investing world, it would seem that there isn’t
much of a slow down in sight for the world’s most liquid and traded
market.
Risk Disclaimer
This website is for informational purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or financial futures instrument or to participate in any particular trading strategy. The information presented on this website is for general information only. Although every attempt has been made to assure accuracy, we assume no responsibility for errors or omissions. Forex-, Stock- and Futures trading is speculative, involves a high degree of risk and is designed only for sophisticated investors who are able to bear the loss of more than their entire investment. Performance figures shown are from a live forward test and can be considered hypothetical. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there can be frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully account for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. |
