What You Need to Know About Foreign Exchange Markets

Trading in various assets and commodities is more open to the general public than perhaps at any other time in the past. Owning stocks and shares hasn’t always been restricted to the elite by any means, but now with the internet, anyone can get involved in different types of trades.

Of course, in recent times the media has been full of stories of bitcoin going through the roof, only to plummet once again. Then there have been lurid tales of NFTs selling for millions of dollars, only to somehow become worthless – see Jack Dorsey’s Twitter NFT.

Forex trading is another type of investment that appeals to both professional traders, and casual or amateur investors alike. Forex trading can make serious money.

According to Investopedia, George Soros made the biggest ever single forex trade when he shorted the British pound and made over $1 billion on one hit. Of course, these types of trades are not typical, but that doesn’t mean that you can’t make a profit with some knowledge, and shrewd tactics.

What are foreign exchange markets?

The foreign exchange market is described as being an OTC marketplace. That is to say that it is not centralized, and the currency markets are made up from a number of companies, investors, brokers, exchanges, and other concerned parties.

Britannica defines the foreign exchange market as the institution for exchanging the currency of one country for that of another. Therefore, each currency is designated as a separate market. The mainstays for foreign currency exchanges are London, Tokyo, and New York.

Unlike stock exchanges, for instance, the foreign exchange market trades for 24 hours a day. And, it is the largest financial market on the planet.

Can you make your own forex trades?

You may be wondering, can forex trading make you rich? Well, if you are lucky, savvy, and choose the right trades, then possibly. But like any type of investment or trade, there is always a particular amount of chance.

You can certainly get involved though. To get into forex trading you will need to find a platform or broker to use. More on choosing one of these further down the article.

You will then have to establish an account for CFD trading, or spread betting. You will need to choose a strategy or trading plan that suits you. Then you need to do one thing that is key, and that many newcomers ignore; research.

You take the time needed to research the pair you wish to trade on. By pair, this means the rate of the two currencies that you will trade on. Then when you are ready, it is time to make your trade and close your position when ready.

How do you find a reputable forex broker?

Finding a reputable forex broker can be as simple as searching online. With so many people indulging in forex trading, there is a mine of information online. Look for forex broker reviews, and then compare the pros and cons of each platform against what you are looking for.

Do the fees appeal to you, or does the customer service seem poor? Look for how long the platform has been in business for, check that it is regulated, and also check on the security in place. Remember, you are dealing with real money, and passing on sensitive information online.

What should you be aware of?

There are a number of risks associated with foreign exchange trades. These can be down to time differences, and the resultant exchange rates changing before a trade is closed. Then there are risks associated with countries, as recently seen with Russia’s sudden invasion of Ukraine.

Using leverage in a trade brings its own risks, and then again there are interest rates that can affect trades also. You may also want to know how to check for forex broker scams because some of these do exist.

Can you day trade with forex?

During the pandemic, more individuals turned to day trading than ever before. Forex trading has also attracted its fair share of amateur day traders, as well as more experienced, or seasoned, individuals.

Day trading can be high risk, but it can bring substantial rewards. Risking large amounts of capital on day trades often results in heavy losses. If you are interested in day trading on the forex, then you should invest real time into learning how. This area is not a get-rich-quick trading scheme and can be a fast way to lose a lot of capital.

Summary

Forex trading can certainly be exciting, and profitable at times. Copy trading is a way for a beginner to enter the world of forex and test the water by following their peers. But for long-term success, some research must be done.

There is much more to foreign exchange markets than can be slotted into this article, but if you are interested in forex, then delve deeper before you start to invest in this incredible financial market.