Currency Trading Information Channel |
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Forex Trading - Advantages and DisadvantagesWhat is Forex Trading? Forex, or Foreign Exchange, is the simultaneous exchange of one country's currency for that of another. This market of exchange has more daily volume, both buyers and sellers, than any other in the world. Taking place in the major financial institutions across the globe, the forex market is open 24-hours a day. Currencies are quoted in pairs. The first listed currency is known as the base currency, while the second is called the counter or quote currency. In the wholesale market, currencies are quoted using five significant numbers, with the last placeholder called a point or a pip. The forex market is one of the most popular markets for speculation due to its enormous size, liquidity, and tendency for currencies to move in strong trends. An enticing aspect of trading currencies is the high degree of leverage available. Advantages of forex trading Leverage. Huge leverage is available in Forex trading, often up to 100:1 meaning that large profits can be generated from small margin deposits. Liquidity. The enormous size and global trading of the forex markets means that the markets in the major currency pairs are very liquid making trade executions almost instant with little slippage. Ability to go short. Since currency trading always involves buying one currency and selling another, there is no structural bias to the market. This means a trader has equal potential to profit in a rising or falling market. Trends. Fundamentally, the value of a country's currency is determined by interest rates and the strength of the economy in relation to other countries. Currencies, therefore, have a greater tendency to trend until the fundamentals change. Disadvantages of forex trading Leverage. With huge leverage available to forex traders the danger is that positions which carry too much risk for the account size can be taken on, leading to margin calls. Effective money management rules must be adhered to. Brokers. Retail traders must use a broker rather than dealing directly in the interbank market. The broker will be the counterparty in all transactions and is, effectively, making the market. They can, therefore, widen spreads or even refuse to trade during volatile trading conditions. To avoid dealing with brokers an alternative to forex is to use futures. See online futures trading for more details. Spreads. As the retail trader must use a broker to trade, they cannot deal at the interbank rates. A broker will generally quote a fixed spread of 3-20 pips depending on the currency pair. The underlying interbank rate might be as little as 1 pip. Forex is a very large market but for most retail traders dealing with brokers the odds are shifted against them. Online futures trading provides a much more level playing field for most traders who want to take part in forex trading. Tim Wreford operates Online Futures Trading, a website that provides information and resources for traders. Tim also provides an article detailing the development of a day trading system, the results of which are updated daily on the site.
MORE RESOURCES updated Fri. April / 19 / 2024 JP Morgan’s new way to trade FX overlays FX Markets US, Japan and South Korea seek to limit dollar's rise Financial Times Foreign Exchange Outlook Forex Factory oneZero and New Change FX Partner for Advanced Trading Analytics Finance Magnates Navigating the US to Mexico Exchange Rate in 2024 FinanceFeeds They Bet Against the Dollar. Now They're Paying the Price. The Wall Street Journal They Bet Against the Dollar. Now They're Paying the Price. The Wall Street Journal How to get started in trading forex CNN Underscored Stock market today: Asian benchmarks trade mixed amid expectations for US rates to stay high FOX 5 San Diego Illegal money changers adapt to Zimbabwe's ZiG currency rollout Business Insider Africa Zimbabwe's new gold-backed currency sliding on black market Voice of America - VOA News Celebrity FX Academy APG University and Etoro Become The Biggest FX Education Hubs Worldwide Yahoo Finance Stock market today: US stocks slip to deepen weekly losses following mixed earnings reports CW39 Houston Stock market today: Wall Street rises to recover some of last week's loss as oil prices ease ConchoValleyHomepage.com How SEC Regs Will Change Cryptocurrency Markets Investopedia Stock market today: Global benchmarks are mixed while US seems committed to current rates Beckley Register-Herald Stock market today: Asian stocks track Wall Street's decline as Middle East tensions escalate Times Union This Is How You Make Money Trading New York Magazine USD/JPY Analysis:Today 18/4: Watching Japan Cautiously DailyForex.com Japanese Yen Forecast: USD/JPY Rally Nears 155 – Is the BOJ “The Boy Who Cried Wolf?” - FOREX.com US EUR/USD Analysis Today 18/4: Weak Uptrend Attempts (Chart) DailyForex.com 3 Best Forex Brokers for 2024 NerdWallet C8 Technologies launches new systemic FX hedge platform The TRADE News B2Broker Increases Leverage on Major FX Pairs to 1:200 Yahoo Finance Iran News: Iranian Central Bank Threatens Taxation on Currency Buyers Amid Soaring Dollar Prices - NCRI National Council of Resistance of Iran (NCRI) Towards Increasing Complexity: The Evolution of the FX Market - Liberty Street Economics Liberty Street Economics - Latest Fed comments eyed by traders for US rate cuts outlook IG International Forex Trading for Beginners NerdWallet Foreign exchange contact group (FXCG) European Central Bank Why Is the Forex Market Open 24 Hours a Day? Investopedia FOREX.com vs. Robinhood: Which Is Right for You? The Motley Fool EUR/USD, EUR/GBP and AUD/USD bounce off support IG UAE (English) Korean Won Overtakes US Dollar as Most Widely Used Currency for Trading Cryptocurrencies - ihodl.com Dollar takes a breather as investors ponder US rates outlook The Economic Times US Dollar Forecast: AUD/USD Takes Out February Low FOREX.com US China's New Currency Playbook Council on Foreign Relations How Often Do Exchange Rates Fluctuate? Investopedia EUR/USD Analysis Today 16/4: Nearest Buying Levels (Chart) DailyForex.com GBP/USD Analysis Today 18/4: Weak Sentiment on GBP (Chart) DailyForex.com Gold Analysis Today 18/4: Temporary Halt to Gains (Chart) DailyForex.com AUD/USD Signal Today - 18/04: Resistance at $0.6456 (Chart) DailyForex.com GBP/USD Analysis Today 16/4: Strong Selling Pressure (Chart) DailyForex.com EUR/USD, DAX may be down – but they're not fully out FOREX.com US How to Trade Forex for Beginners | Learn Strategies and Tips Admiral Markets USD/BRL Analysis Today - 16/04: Values Surge High (Chart) DailyForex.com GBP/USD Analysis Today 17/4: Opportunities Weak (Chart) DailyForex.com NZD/USD Analysis Today- 18/04: Lower Realms Solidify (Chart) DailyForex.com USD/TRY Forecast Today 18/4: Lira to Fall to Record Lows DailyForex.com
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