What is Forex Trading: Might be you hear the name “Forex” many times in your life you also hear that many people are creating their wealth by trading FOREX. Now the question comes to your mind that “what is forex trading” Let us see.
Forex is also called foreign currency exchange or simply FX. Forex is a conversion of one currency into another currency. It is the most traded asset in the world. The daily traded volume of forex is more than $5 trillion. In this article, we are going to discuss briefly all about forex.
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How can you benefit from exchange rate changes?
The price of currency pairs changes all the time, the trader makes a profit from those changes. For example :
You go abroad and you convert $500 in euros. After 1 week you come back without spending a single euro and exchange your euros into USDs and you get $505. Here you make a profit of $5 by trading currencies.
Nowadays due to the advancement of technology you don’t need to leave your house to trade currencies. You can trade currencies by sitting at home also with the help of a smartphone and you can make a potential profit by trading currencies.
Which Currencies Can You Trade?
There are many currencies you can trade. Are divided into following type
1) Majors – 80% of entire exchange. EUR/USD USD/JPY GBP/USD AUD/USD USD/CHF NZD/USD USD/CAD
2) Cross Pairs – Currency pairs does not include US Doller
3) Exotic – One major currency and other currency of an emerging economy. EX- USD/ZAR
Concept of Pips
Now, this is time to understand the concept op pips, PIP stands for Percentage In Point. For most of the currencies, it corresponds to the movement of one unit of forth decimal of the exchange rate. But there are some exceptions like Japanese Yen it corresponds to movement of a second decimal digit
Trading time of forex
The forex market opens for 24 hours except for Saturday and Sunday
Leverage Currency Trading
In the forex market, may of the brokers provide leverage up to 1:1000
But smart trader uses less leverage as per their convenience.
Let’s take one example, you choose a 1:500 leverage scale then here you can invest $500 per $1.