We have discussed before, what trading is and how it works.
Foreign exchange trading (or forex trading, FOREX, FX as it is widely known) means selling one currency to buy another currency. It is essentially the trading that occurs under this.
- Alberto who leaves in Europe wants to visit US. He needs to exchange his Euro to US Dollars. Hence he sells Euro to buy US Dollars.
- A US car company imports cars from Japan. So the company needs to exchange their US Dollars to get Japanese Yen. Hence they sell US Dollars to buy Japanese Yen.
- Speculation for profit. The same way a person buys a financial product expecting its price to rise.
Why trade FOREX / Advantages of FOREX
- Largest and most liquid market in the world (over $6 trillion daily turnover) . Allows to see very fast results.
- Allows for high leverage (trading on margin). Ability to trade larger amounts than your funds to increase returns.
- Continuous trading that runs Monday to Friday.
- Ability to make trades on both rising and falling markets .
- Smaller capability by someone to manipulate the prices or inside trading due to the size of the market