What is Forex Trading? Pt 1.
Everyone takes part in Forex trading because we all exchange currencies for one reason or another. Forex trading is simply put, the exchanging of two currencies for one another.
Any situation where two currencies are exchanged is basically a Forex transaction and part of the worldwide Forex market. Now, of course, that is the definition in its most basic form and that’s not what we usually mean when we refer to Forex trading.
Normally, Forex trading refers to the day-to-day speculative trading of currencies on the decentralized foreign exchange market for the purpose of earning profits. Even more specifically, the term Forex trading is used in regard to the online, retail trading of currencies by ordinary individuals.
The Foreign exchange market is the global marketplace where currencies are traded between banks, corporations, other financial institutions, and individual investors. It’s more commonly known by the acronyms Forex or FX.
With the technological advancements in computers and electronic devices in the late 1990s and early 2000s, Forex trading became widely available to almost anyone, and currencies can now be traded and exchanged easily from every corner of the globe.
Forex trading offers unique opportunities
Forex trading offers the ability to profit from any market move, regardless of whether prices are rising or falling. In Forex trading going long and going short are two identical things, because when we buy a currency pair we are actually buying one of the two currencies and selling the other one at the same time. Having the option to profit in good and bad times is an advantage and it makes Forex trading a very attractive investment option.
Forex trading also offers the opportunity to open and close positions 24 hours per day, Monday to Friday. The flexibility to trade at any time during the day and night makes Forex trading suitable for individuals from all corners of the world. Everyone can trade at a time that fits their time zone and their lifestyle instead of waiting for the market to open at a specific time.
Forex trading comes with super-low trading costs mainly because the Forex market is the largest and most liquid financial market in the world. Traders’ profits are automatically bigger when all their costs of doing business are lower.
The highest leverage is also offered only in the Forex market. When used wisely and cautiously, leverage can boost profits by a huge margin. Available leverage for Forex usually ranges from 50:1 to 500:1 and sometimes even greater. It simply means that a trader with $1,000 in his account has the ability to manage and trade with $50,000 on a 50:1 leverage and $0.5 million on a 500:1 leverage! Any profits are therefore boosted severalfold, however, the same is true for losses as well.
To learn about the dangers of leverage make sure to also check out the section on risk.
Forex trading as a source of income
Most people who trade Forex are in it to make profits and most often with the ultimate goal to trade for a living. With a sufficient starting investment and a good trading strategy, an investor can earn enough on a monthly basis to live on that profit.
Now, what does trading for a living mean in a broader sense?
For starters, if you find Forex trading a satisfying experience. it can be an exceptional job or business to have. Among many, the main reasons why are the potential to earn big profits and the freedom that comes from working remotely.
To trade Forex, all you need is a computer and a connection to the internet. Nowadays even a tablet or a smartphone will do just fine. And, of course, your skills to trade the Forex market are of crucial importance as well.
But that’s about it, really. No matter whether you are in New York, on the Bahamas, in the Sahara Desert or the North Pole. If you have an internet connection and a device to open and close trades you can make money with Forex trading.
A lot of people are drawn in by the freedom and the high potential for profit that Forex trading offers as not many other jobs do so.
Forex trading for prestige
Having a prestigious sounding job is what motivates some individuals, and Forex trading can be that job.
The fact that most regular people don’t even know that such a thing as Forex trading exists or that currencies can be traded online, makes it compelling enough for some to feel important among their friends or in social gatherings.
Telling your friends or a group of people you’ve just met that you are trading currencies as your job makes you sound important, or so it does for some people. There are individuals who are definitely in Forex trading because it makes them feel important, especially if large sums of money are involved.
Although in today’s world everyone can open an account and trade Forex with a few hundred dollars, there are traders that invest tens and hundreds of thousands. Of course that those people will feel important when they say they are trading the Forex market for a living!