Forex Trading Advice

Forex trading is not for the faint of heart. Unlike stocks, it is highly volatile and can easily be wiped out by a small change in price. Therefore, it is important to understand the risks of forex trading before you get started.

The foreign exchange market is divided into three sessions: the New York session, the London session, and the Tokyo session. These sessions are open 24 hours a day, seven days a week, and can be traded anytime. However, some times of the week are less than ideal for trading, such as bank holidays.

Traders often use leverage to magnify their gains. This involves borrowing money and using it to purchase a higher interest rate currency. Leverage can also increase losses.

Another forex trading strategy involves buying a low interest rate currency and selling it for a higher one. While this approach is risky, it can produce significant profits.

For example, if you purchased EUR 1 million at a 6-month forward rate of 1.20, you would be able to sell it for $1.18m. That could provide a profit of around 30%, depending on the amount of leverage used.

In addition, interest rates, currency pegs, and geopolitical developments are also important factors in the currency markets. Currency prices are set by the supply and demand of buyers and sellers.

The most popular currencies in the forex market are the dollar, the euro, and the British pound. Other currencies include the Australian dollar, the Swiss franc, and the Japanese yen.