Forex trading is all about buying and selling different currencies. The aim is to make a profit. All Forex transactions involve two different currencies that are traded at a time: the quote currency and the base currency. The difference in price is how you can make a profit from your transaction.
All kinds of trading activities have a certain amount of risk involved. But it is also an extremely easy way to generate profits. This is why today so many people are involved in Forex trading. In fact, the forex market today is the single largest financial market in the world.
In terms of size and volume alone, it easily dwarfs every other commercial market. The total daily volume is well above $5 trillion, which shows that so many people trust the market to gain a windfall.
A position is defined as a trade that is currently in progress. When you decide to start trading in foreign currencies, you will be faced with the choice of a short position or long position:
This position signifies the fact that the trader has sold his basket of currencies with the expectation that the currencies will depreciate in value. Once the currency being traded is bought back, the short position will automatically be considered to be closed.
A long position takes place when the trader has purchased a specific currency and they expect that its value will increase. Once, they sell it back, their long position is considered to be closed.
There are many advantages to forex trading when compared to other investment activities:
You won’t have to worry about any sort of clearing fees or exchange fees. Since you are trading by yourself, you won’t have to pay any government fees or even brokerage house fees either.
If you were to trade in a futures and commodities market, your contract size will be determined by the exchanges. For example, the usual contract size for silver futures is measured at 5,000 ounces.
When trading in foreign currency, you do not have to buy a specific amount. In spot forex, you alone have the authority to determine your own position as well as the lot size. This means that you can start trading for an amount even as small as 24$ to get a feel of the market.
The forex market is huge. There are so many participants at any given period of time that no single induvial or company can control the prices for an extended period of time.
Forex trading can help you achieve your supplemental or even primary income goals. However, it is always best to start slow or use our demo account for a few days. This way, you will be able to understand the inner workings of the market in a real-world environment. Once you feel that you are ready to go live, you can start investing real money and watch your profits accumulate into a snowball of savings.
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