Otherwise known as FX trading, Forex trading is involved with the pairing of disparate currencies in order to realise a profit from movements within the relationship. This is the only decentralised market on the planet and a massive $5.3 trillion dollars changes hands each day (1). Thus, it also offers the most liquid opportunities for traders of all sizes and experience levels. In order to appreciate the numerous advantages which are offered by the Forex marketplace, it is wise to take a closer look at how a typical trade functions. Moving Currency Pairs The fundamental strategy behind Forex trading is to take advantage of the movements between two currencies. Should the direction and volume be predicted correctly, the investor stands to make a great deal of profit in a relatively short time frame. Some of the major currencies that are utilised include:
Another distinct advantage of these pairs is that the Forex markets are always open in some portion of the world. This is in direct contrast to other indices such as the FTSE or the Dow Jones. Spot Trading and Online Platforms The rise of high-speed Internet now enables traders from all walks of life to open and close positions at their discretion. The modern platforms offered at CMC Markets also provide numerous tools such as chart predictions, live news feeds, technical analyses and even mobile-friendly systems. This helps to further streamline any position while the possibility of electronic spot trading is an excellent opportunity for those who wish to take advantage of short-term strategies. Another pivotal benefit is that these very same electronic brokerages have eliminated the middleman from the typical trading scenario. Thus, more appreciable profits can be realised and all spreads are extremely clear. When to Begin Forex Trading This is a question that everyone will address differently. Still, there are a few guidelines to mention so that one can enjoy healthy profits while mitigating the inherent risks. The first issue revolves around the ability to invest capital without superseding financial limitations. It must be recalled that high liquidity directly equates to an increased level of volatility. Secondly, it is important for any new trader to have an understanding of how the Forex markets function. Basic fundamentals and technical knowledge are both critical to make the correct predictions at the appropriate times. While an investor will occasionally get “lucky”, the truth of the matter is that these markets are as much of a science as they are an art form. Prudence is the key here and foresight can go a long way towards building a healthy portfolio. Those who hope to become financially independent will certainly appreciate the benefits of Forex trading. Still, it is only through the use of intuitive platforms such as those offered at CMC Markets that a budding trader will become a professional investor. Please contact us to learn more about how we can help you!
Sources: 1. http://www.reuters.com/article/markets-forex-volumes-idUSL5N0VS3PD20150218
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