Forex Trading Advice
Forex trading is a worldwide market. Although retail traders are not allowed to trade on the forex market during the weekend, rates will continue to move. Forex brokers are regulated by different bodies worldwide and must follow strict ethical standards. Some examples of these bodies include the Monetary Authority of Singapore and the Australian Securities and Investment Commission.
The major currency pairs used in forex trading include USD/JPY, EUR/USD, GBP/USD, and USD/CHF. Traders trade in these pairs by attempting to predict the future values of currencies. In the primary forex market, the euro to US dollar exchange rate is the most popular, as it trades the value of one euro in US dollars.
Traders can use leverage to control large sums of money with small deposits. Leverage involves borrowing money from a broker and trading with more money than you deposit. Most regulated forex brokers limit the maximum leverage retail traders can use. Generally, the maximum ratio is 1:30 or 1:50. For example, 1:50 leverage means that a trader can trade PS50 for every PS1 in their account. Forex traders should understand that this type of leverage involves risk and should only be used when appropriate.
Using forex trading is relatively simple, but it does require knowledge of currency markets. As with other markets, currencies are traded in pairs. For example, GBP/USD represents the British Pound to US Dollar exchange rate. The number of US Dollars is known as the base currency. The second currency in a pair is called the quote currency. As a result, traders must determine which currency is stronger against the other currency in order to profit.