Forex Trading Advice
Forex trading involves trading in currency pairs. It is an investment strategy that involves speculation on world events and the relative strength of major and minor economies. Unlike stock trading, where one must invest a large sum of money to participate in a trade, forex trading allows a smaller amount of capital to be used to trade.
The forex market is not directly correlated to the stock market, but currency pairs can move in tandem. For example, during the 2007 global recession, the USD/JPY pair followed the Nikkei index. Therefore, forex trading entails a high degree of risk. Traders should bear in mind this risk when choosing a strategy for trading.
Trading in currency pairs takes place over-the-counter. A forex broker facilitates the process. Because the forex market is not regulated by a centralised exchange, it does not follow the working hours of the stock market. As a result, traders can trade on weekends and during the weekday. This allows traders to capture trades across time zones.
The forex market uses bid-ask spreads to determine exchange rates. The difference between the bid and ask prices determines the value of a trade. A typical forex lot is 100,000 units, but you can also trade with micro or mini lots.