What is a currency trading?
Currency trading is the largest financial market on the planet. It is estimated that more than 2 trillion USD USD (USD) is traded every day. Compare this to the daily transactions of the New York Stock Exchange of approximately $ 50 billion USD, and you can see that the currency market size exceeds all other stock markets in the world.
The practice of currency trading is also commonly referred to as foreign exchange, forex or FX. The whole currency is worth in relation to other currencies around the world. Currency trading uses the purchase and sale of a large amount of currency to replenish changes in the value of the currency to get profit.
Why the currency value fluctuates
There are two main reasons why the relative currency value varies. The first is because of the "real" market that is based on supply and demand. For example, because external investors or visitors want to buy things in another country, Azn's forced to convert their home currency into the currency of the country they buy. As the money leaves the country, people mustSell their currency for a foreign currency they will have to spend or invest abroad. The exchange of currencies controls supply and demand, causing an increase or decrease in the value of the currency.
The second force for currency fluctuations is speculation. When investors think the currency will act strongly or weakly, they will buy or sell accordingly. This speculation can have drastic consequences on the national currency and subsequently on the country's economy. For example, during the East Asia crisis in 1997, when nations in Asia began to face an economic decline, speculators used trading in a currency to realize huge profits and, in the opinion of many analysts, helped to worsen the problem.
The benefits of forex
currency trading has many truly benefits over different types of trading in capital, such as a stock exchange. The Forex span is extremely low, which means that there is no in terms of currency and bid price ineliminates distance; This usually results in very low costs for currency merchant. The volatility or measurement of how much the price varies over time is extremely high, which means that the trader can generate a huge return on the exchange. The volatility ratio to spread is approximately 500: 1 for the Forex market compared to 100: 1 even for even ideal stocks. In other words, trading in currencies generally includes a fluctuating prices market and traders who agree on price.
Until recently, the market for trading in currencies was closed for small investors. The main tractors of this marketplace were banking conglomerates composed of several companies and large multinational companies. Over the past few years, however, the door has opened new technologypro investors of all lanes: now it is possible for individuals to participate in the Internet market. There are several websites that allow a person to create an account and a business currency from their own computer; Some services also have brokers who pThey provide advice, answer questions and help manage trading. It is difficult to omit the huge advantage of this "new" market for an individual investor: higher revenues with a lower risk, due to the same amount of market knowledge, have a very small disadvantage.