Forex Trading. The foreign exchange market is the world’s largest market with an estimated daily traded volume of approximately USD 5 trillion.
The foreign exchange market consists of millions of different players;
Large banks, governments, hedge funds and professional money managers together with companies with commercial currency needs and smaller private investors and traders all speculating to achieve returns in this gigantic market-place.
There is an extreme level of liquidity in the foreign exchange market. With a daily traded volume that is several times larger than all of the world’s stock markets’ combined.
What affects the exchange rates?
The value of each individual currency is continuously affected by a number of factors;
National and international macroeconomic conditions, such as unemployment, inflation, and economic growth etc.
Further, interest rates and changes interest rate differences has always had a significant effect on foreign exchange rates..
This, as well as fiscal and monetary policy as well as psychological conditions are all significant factors affecting the exchange rates of the various currencies.
Statistics published regularly which historically has influenced exchange rates the most are; interest rates, GDP-numbers , unemployment, and inflation figures.
Most of these macro statistics, and the price movements that tend to follow in the wake of these being published are often perceived as short-term noise by currency investors.
This while short-term traders typically try to exploit the movements that occur upon the release of these various statistics.
How does Currency Trading work?
All currency trading takes place based on the price movement of currency pairs.
In other words, you trade currency in “pairs” where you have an opinion on that one currency will increase in value relative to the other.
An example might be the EURUSD currency pair, which is Euro and US Dollar.
If you buy the EURUSD pair, you are in practice betting on the Euro rising in value relative to the US Dollar.
Conversely, if you believe that the US Dollar will increase in value against the Euro you would sell the currency pair EURUSD.
The foreign exchange market is divided into two segments;
Approximately 10 % of the foreign exchange market represents commercial trade (typically exporters and importers buying and selling goods in a currency other than their own).
The remaining 90 % of the currency traded is in practice speculative and to be considered as investments of various kinds.
Currency can be traded with so-called spot contracts, forward contracts, and by using options.
Most brokers offer currency trading through rolling spot contracts, which means that when you open a position, it will remain open indefinitely as it does not have a fixed expiry date, and you are free to close this position whenever you want.
Why start with currency trading?
Historically, exploiting fluctuations in exchange rates with the intention of profiting from market movements and exploiting interest rate differences (carrytrades) have been the most common reasons of anyone trading in the foreign exchange market.
The foreign exchange market can be effectively used to hedge investments in other asset classes (such as equities and commodities).
Investors and traders also tend to capitalize on the fact that several countries from time to time want to lower the value of their own currencies in orde for their own export industries to gain competitive advantages.
Today’s foreign exchange market (March 2021) offers historically unique opportunities.
Trade disputes and political differences have to som degree led to quite unpredictable market conditions.
Huge budget deficits and the corona virus situation have further resulted in very large market impacts and extreme price movements.
These price movements represent enormous opportunities for currency traders, and others seeking to take advantage of the historically large movements.
If you choose to take advantage of copy trading and follow another trader, you will automatically get the same currency positions on your own trading account as the one you are following are trading and holding on their own trading account.
If you have questions regarding currency trading and or copytrading please feel free to contact us at; [email protected]