What is Forex trading?
The forex trading, also known as currency trading refers to the buying and selling of the foreign currency in the forex market to make some profit. The Forex market is a common platform on a global level where the banks, investors, government, and traders deal in foreign currency. The exchange of currency is essential to carry on the trade and business between the countries.
Let’s take an example to understand this more clearly if you think the Dollar shall become strong against the Euro in the coming few weeks, then you can buy Dollar at lower rates by selling Euro now. So, when the Dollar will become strong in the future, then you can sell it to buy a Euro. It is also called speculative trading since if your assumption does not go right, you can lose money also.
In forex trading, there is no dedicated marketplace. All the transactions are processed electronically over the internet through one centralized platform that i.e., the forex market.
Here are few of the features of forex trading:
- 24 hours trading allowed: you can trade forex almost 24 hours and 5 days in a week. Since the transactions are happening on a global level, so the market is open in all the time zones. So, it allows for trading any time of the day or night;
- No limitations: unlike the share market, there is no limit on the number of transactions that can be made in a day. You can go long or short any number of times;
- Low trading cost: trading in the forex market is cheaper than any other trading market. There are no hidden charges and the commission charged on the transactions are minimal;
- Global platform: the trading in the forex market is done at international level. There is no separate marketplace for every country. Rather, all the traders trade at a common platform which gives you an opportunity to do business with people from all over the world;
- Increased leverage: with forex trading, you can enjoy very high leverage. With so many transactions happening throughout the day, you can easily trade even with the big lots.
Forex trading comes with its own risks and rewards. You need to educate yourself thoroughly about the technicalities of the forex market before going ahead with the trading.