Thu. Aug 6th, 2020

What Do You Mean By Forex Trading?

3 min read

As the business industry moves to being global, people and entities need negotiable tools to effectuate transactions.

Currencies have different values in different countries.

This dilemma is recognized by Bretton Woods and thus pushed for a system that allows a free flow of trading between nations after the World War during the United Nations Monetary and Financial Conference.

The structure that we have at present was a result of this action. Hence, we have foreign exchange trading.

There are two views on why forex trading is vital and considered the largest and liquid in the financial market.

One, companies, the government, and even individuals earn or has acquired foreign currencies through buy and sell transactions.

The second is the conversion of profits from foreign countries. Thus, on a daily basis millions, billions and even trillion of money flow through the trade.

If you haven’t caught up with the picture just yet, forex trading, also known as foreign exchange trading or FX trading is a process by which currencies are sold and bought.

Although it is referred to as an exchange, currencies are actually traded. Hence, there is physical office or ‘products’ being exchange.

There is only a computer network that connects dealers, entities or institutions for the transaction. It is even available for 24 hours a day.?

Forex trading is open to anyone. When traveling to a foreign country and you exchange your currency to that of the foreign country is already participating in the forex trading.

That simple transaction already allows you to be part of the market. However, there are other ways that you can join and participate. You can be a dealer or an investor.

Being a dealer will require you license as a broker or dealer to be able to enter the market. There are several brokers in Singapore that you can connect with when you want to be an investor.

The investor in forex trading can be individuals, who are called the retail forex traders or large organizations, which are institutional traders.

Institutional traders such as banks, hedge funds and investments managers make up the biggest participants in the forex trading.

Banks serve as the facilitators of trading for their clients, while hedge funds and investment managers have pension accounts and the likes involve in the market.

A portion of the player’s pie consists of individual traders or the retail forex traders. They are relatively smaller compared to large institutions. But, more and more individuals are attracted to forex trading. ?

#1 The fixed spread is the type of spread that has a fixed ask and bid price regardless of the market backdrop. The amount does not change and mostly done by automatic trading.

#2 There is also a fixed spread with extension, which is a spread having a part fixed, and a part that is set and the other part is dependent on market changes.

#3 The variable spread is the opposite of the fixed spread, which changes as the market conditions also change.Through understanding the spread and its efficient use, whether it be fixed, with an extension or a variable one will lead to success.

That is why having a trustworthy dealer and platform is very important for investors especially if they are new to the industry.   What is leveraged trading?

Leveraged trading is one of the known strategies that investors can do to manipulate the forex trading in their favor.

It is the when your dealer loans to you, the investor, money to increase your capital required, which the margin.

Using a leverage is a win-win for the investor and broker if done right. It can help deal with fluctuations in the rate of exchange.

In some way, leveraged trading can distribute the risk associated with the trading business although it is in the form of a load.

An example of this is when your broker lends you an amount of money for your forex trading account, and you earn a certain percentage. Your own capital and that of the loaned money will also increase.

Hence, you have the capital plus the loan money and then the profits based on the amount of your original money and that of the money that the broker has loaned to

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