What is Forex Trading?
Forex trading is the exchange of one currency for another. The aim of this activity is to predict whether a certain currency will rise in value (buy) or fall in value (sell) against another, thus increasing its value or reducing its value.
The forex market is organized into pairs, with each pair being a combination of two currencies. The price of a currency pair is determined by the difference between the bid and ask prices. This is called the bid-ask spread.
Traders typically trade in mini and standard lots, with the minimum lot size being 100,000 units of the currency they are trading. A lot also includes margin money, which is used to increase the amount of capital available for a trader to use.
Advantages of forex trading
Forex is a highly liquid and competitive market, making it easy for traders to make a profit in a short space of time. The forex market is accessible from a wide range of countries and is open 24 hours a day.
Trading is a dynamic and constantly changing environment, with lessons being learned every day. Successful traders stay on top of what is going on in the market by continuously educating themselves through insightful webinars, online courses, videos and books.
The most common trading styles are position and swing, both of which require patience and tolerance for high levels of market risk. Swing trading involves holding a single trade for a few days or weeks, normally with a high level of leverage. It is an ideal trading style for part-time traders who are not able to trade daily and do not have the luxury of being available in front of their trading screens.