What is Forex Trading?

Forex Trading is trading in the foreign exchange market. The term “trading” has long been used in the banking industry. However, originally it referred to the process of securities buying and selling for the purpose of making a profit. Forex Trading pursues the same objectives, but the currency acts as a commodity in this market. To trade, you need to find forex prop firms.

Like other commercial transactions, buying and selling currencies involves making a profit on the difference between the buying and selling price. In this case, the expression “exchange rate difference” is more appropriate. 

Forex Trading is a process that involves commercial and state banks, investment funds, and individuals. They buy currency for different purposes. But speculative trading on Forex is a phenomenon that allows earning fast and often. Moreover, due to the leverage which reaches the ratio of 1:1000 the earnings can be considerable even with small initial capital.

Forex – is for everyone

Forex trading or currency trading is an investment activity, where currencies are traded and money is made on exchange rate fluctuations. You don’t need much to make exchange transactions: a special program installed on your computer and the Internet, so anyone who wants to can become a Forex trader!

What makes Forex trading so special is that there is nothing “tangible” about trading. Money is a commodity and a means of payment in the forex market, but it does not technically physically reach the trader. A trader, in fact, trades with risk, which he takes upon himself buying and selling currency pairs.

Benefits of Forex and Forex Trading

Why even think about Forex trading when there are so many other options, from stock trading to crowdfunding? Here are some of the benefits of choosing currency trading as an investment method:

Advantages of Forex trading

Investments are small

You can start out neatly in the forex market with a hundred dollars, and you can trade very small amounts, which means that a couple hundred dollars can work pretty well.

The forex market is very liquid

Because the forex market is so large and so depressingly active, transactions are completed in seconds and at the price that was currently in motion.

It’s available anytime, anywhere

All you need is an Internet connection and a computer to trade forex, sometimes even a smartphone is enough, since many trading platforms are to some extent even available through mobile applications. Thus, you can trade anytime, anywhere, even in the woods, as long as you have mobile Internet! Trading is open Monday through Friday at any time.

There are many trading instruments

Although some currency pairs are the most common and move faster, there are actually many currency pairs and therefore many different tools to trade.

No Brokerage Fees

This is probably the biggest plus compared to the stock market, as the stock market has very high brokerage commissions. In the forex market, all of the transaction value is distributed.

How does currency trading work?

Forex trading used to be a banking business, but thanks to advances in technology, everyone can now become a Forex trader. To do so, you need to sign a contract with a broker who will take you directly to the Forex market, thanks to a trading platform, which is a computer program that monitors currency fluctuations and can place orders and sell pairs.

The Forex market itself is made up of absolutely all market participants, the most important of which are banks, which are market makers. Some of the Forex market participants are brokers and the rest of the market is made up of people just like you who trade currencies or exchange their money while traveling abroad.

The Forex market trades currency pairs, not a single currency

For example, you may see currency pairs such as EUR / USD or GBP / USD, which means that the euro or pound is exchanged for the dollar. As a trader, you can buy a currency pair and sell it later if the price of the currency pair is more favorable to you – you make money on the price difference.

Can you get rich with Forex Trading?

We won’t get tired of repeating it: in every investment, there is a risk of losing money.

But back to the basic question: is forex trading a way to make real money?

The answer: Yes, absolutely.

By using a safe trading platform, you will learn the principles of currency trading, think about your decisions and analyze the currency market. However, the actual profit figures depend on several factors:

The currency market itself (exchange rates can rise and fall unexpectedly);

Your analytical work (how deeply you have analyzed the foreign exchange market, how thoroughly you have made your decisions);

Your financial resources.

Experts say that the most common and expected returns are in the range of 10-15%, and even professional traders do not get such high results, because even very experienced traders cannot predict everything, and exchange rates can fluctuate unexpectedly, so losses are inevitable.

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