The Forex market is a massive one and that is something, I am sure, every investor knows.
Today, one of the most commonly traded products is the foreign exchange currency.
If you have been deciding or thinking about investing in the foreign exchange trading market, there are a few things you must know
One thing you should know about the forex trading market is that it is by far one of the most actively traded markets across the globe.
Moreover, more than $5 trillion of foreign exchange is traded on it on a daily basis. Additionally, if we compare the forex volume traded and global equities trading, the former exceeds the latter’s volume by 25 folds.
We can also say that the forex market is an OTC market. Trading there takes place on electronic platforms. Moreover, through phones and between two parties. The two parties involved in forex are banks and market participants.
3% of foreign exchange is transacted on the foreign exchange today in form of options and futures.
On the other hand, if we talk about the currencies that make up the stock market, we can say that there are certain that are more popular than the others. However, all currencies are listed on the foreign exchange market.
The most popular foreign exchange currencies are:
- Australia (AUD)
- Canada (CAD)
- Japan (JPY
- Euro Zone (EUR
- Switzerland (CHF)
- UK (GBP)
On the contrary, there are certain forex currency pairs that do better than others on the foreign exchange market. These include EUR/USD, GBP/USD, AUD/USD, USD, CAD, USD/CHF, USD/JPY.
The forex market does not have a physical location or a central exchange. It is done through ‘over the counter’ exchange. Forex transfers are also called ‘interbank’ transfers.
Amongst the currencies, the dollar is the most traded one, comprising of almost 85% of all transactions. Euro comes second, with a 39.1% share in the market. Lastly, Yen comes 3rd, with a 19% market size.
More than $5 trillion is transacted on the stock market daily across the globe.
There are many ways to go about foreign exchange trading. However, the best ways include:
- Foreign exchange trading through technical analysis
- Foreign exchange trading through fundamental analysis
- Using both these analyses effectively
The foreign exchange market comes with its own sets of risks. Just like all other markets do. Some of the traders try to achieve their goals using best forex signals.
However, Forex market is considered one of the most leveraged in the world. Therefore, you can trade on it through more higher volumes than you actually have.
There are certain forex brokers that let you trade more than 400 times your account size.
Therefore, with $1000 sometimes, you can control a $400,000 worth of total position size in the foreign exchange market.
However, there are still some precautions you must take when trading on the foreign exchange market.
For instance, you must make sure you understand the risks of the forex market. The risks sometimes associated with the foreign market are so intense that you might end up losing more than you gain.
The foreign exchange market is worth trillions today but all is not gold with it. Least to say, the forex market is complicated and one must be extra cautious when dealing in/with it.