Home / Finance / Currency Trading And Forex Market Primer For Beginners
Across the counter exchange of currencies on a global level is given the label of a forex market. It is operational 5 days a week, 24 hours of each working day so that traders can deal with others across all the different time-zones. Under this broad and single global definition, it is the largest financial market with a $4 trillion daily currency exchange turnover.
The trading is largely decentralized, but traders do have to stick to certain common rules and trading methods. New traders would be well advised to do some study and brush up on basic concepts like the value of currency pairs, and how pips and spreads are used here. The variations in currency pair values are tiny and so are the profit margins, and this results in larger trade volumes. Trades are also heavily leveraged, as compared to stocks or other markets.
Another notable difference is that traders are separated into different access levels. The top-level is occupied by the inter-bank trades between the largest banks. These trades have extremely small spreads (the ask & bid price difference) which are not disclosed to those not a part of these trades. The spreads go up as the trade volume decreases down the access levels.
The next level of access belongs to smaller banks, multi national corporations, and institutional investors. The corporations need the FX to pay employees and suppliers in their own local currency. The hedge funds, insurance companies, pension funds, etc take positions in foreign exchange to hedge their risks and diversify portfolios.
The next level is occupied by the massive money transfer companies. Each of these firms racks up tens of billions of dollars worth of currency exchange. However, it is the retail FX trader aka individual traders who are currently the biggest engine of growth for the forex market.
The main driver for this growth is online trading and the low entry bar. All that?s really required is a fast broadband connected computer and a minimum balance trading account with a broker. The broker offers the platform and tools and data required for technical analysis and executing trades based on a specific strategy.
There are trading systems built using indicators and signals, and traders are expected to know how to build such a system. At the very least, the trader should be able to make use of one of the many systems available for purchase or download. Trading philosophies and styles differ, ranging from technical analysis to study of macro-economic and political trends for each currency.
Thankfully, very informative and direct to the point trading news can be accessed anytime online. The fast uprise of forex brokers review sites in numbers helps a lot in determining reputable ones.
Source: http://eforexsignals.org/finance/currency-trading-and-forex-market-primer-for-beginners-2/
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