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Trading in the largest financial market in the world can be complicated. The market is the most liquid market in the world and trillions of dollars are traded on the forex market 24 hours per day for five days in a week. Any first time trader may be fascinated by how currency trading works. To trade currency successfully, a beginner will need to know a few basics about how the market operates, the terminology involved in the business and a few systems that work.
Your Questions About Currency Trading Answered
1. Who are the Characters in Forex Trading?
Mostly, financial institutions like investment banks and central banks, large corporations and individual investors engage in forex trading. Traders all have one goal in mind for trading, be it financial institutions or retail investors; to make profit. Large corporations on the other hand engage in currency trading in the normal course of international business. Central banks on the other hand do currency trade in order to align currencies to their economic need.
2. What is Online Currency Trading and How Do you Do it?
Trading currency online is the easiest and most convenient way of trading. Online trading involves trading through forex brokers. Traders would place their trades through brokers who in turn would place corresponding trades on the interbank market. When trading forex online, the trader resumes the role of an investor.
3. How do People Forex Currency and Why Trade?
Currencies are always traded in currency pairs. When trading, a trader buys one currency and simultaneously sells another currency. When a trader therefore goes long in one currency, he or she goes short on another currency at the same time. Trading foreign currency is for different reasons. Currency trading for international corporations is for payroll and payment of costs of goods and services. This accounts for about 20% of the market volume. Financial institutions and individual investors trade with a view to generate profit. This accounts for 80% of the market volume in currency trading.
4. What Influences the Value of Currencies in The Trading Business?
There are many factors which influence the value of currencies in the forex market. Such factors include economic indicators, social indicators, political factors and the central bank policies of a country. All these factors determine the value of a country’s currency against other currencies of the world.
5. What Are the Risks Associated With Forex Trading?
Currency trading is highly risky. The forex market is highly volatile and traders must be aware of the real risk of losing money while trading.