Forex trading is becoming ever more popular as a way of generating an income. In fact, the number of people trying their hand at forex trading has doubled over the last decade thanks to the rise of the internet and the ease with which it is now possible to access the money markets. The reality of forex trading is that it is much simpler than traditional trading of stocks and shares with investors being more likely to achieve success. It is no wonder that an increasing number of people are looking to find out forex trading facts in order to take advantage of the liquidity in this lucrative market.
What Is Forex Trading?
Although it sounds complicated, the reality of forex trading is that it is simply the use of foreign currency exchange services to buy and sell money from different countries around the world. People have been exchanging currencies for years when making business transactions abroad or when going on vacation, however it is only recently that the potential of this market has been realized as a way of making profits.
Why Is Forex Trading So Popular?
There are several reasons why more people are choosing to try forex trading:
1. The forex market is open 24 hours a day, unlike the traditional stock market, allowing traders to fit their investments in around their everyday life.
2. No complex knowledge is required, unlike traditional stocks and shares trading. Only a basic awareness of the financial and political situation in the world is necessary to be able to make sensible predictions about the way a currency will swing.
3. The reality of forex trading is that it is less risky than the traditional stock market as a single trader cannot influence its outcome due to the enormous sums passing through every day.
Forex Trading Facts
Anyone considering investing in foreign currencies should be aware of several forex trading facts:
1. Forex trading is always done in currency pairs. The most popular ones are US Dollars/Euros, Euros/Pounds Sterling and Euros/US Dollars.
2. Trading is done in lots or micro lots. A lot is generally considered to be 1000 of a currency unit. Experienced traders may wish to trade in large sums, often up to 10s of 1000s of a currency unit.
3. Trading can generally be done by telephone or via one of the many online trading platforms offered by forex brokers.
4. Forex brokers offer different account types to their investors depending on their needs and experience. Novices can generally open a basic level account in order to develop their skills while the most skilled investors can take advantage of a higher level, high rolling account.
5. Leverage is an important concept in forex trading. Forex brokers may offer a different amount of leverage depending on a trader's account type, and this enables the investor to effectively borrow money from the broker in order to benefit from the fluctuations in the market.
6. Forex brokers offer different pip spreads depending on account type. This is the difference between the buying and selling price of a currency.
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