How Forex Trading Works
If you’ve ever travelled and needed to exchange your money into a foreign currency, Learn-To-Trade.com explains that you have, in effect, participated in the foreign exchange market. Foreign exchange, or forex, is exchanging one currency for another at an agreed-upon price.
Forex is a currency market where individual investors, banks, governments, and traders speculate on the price of one global currency against another. For many reasons, including geopolitical factors and economic factors, currency values rise (appreciate) and fall (depreciate) relative to each other.
The goal of a forex trader is to profit from these changes in value by speculating on which way the forex price is most likely to turn. For example, if the U.S. dollar is expected to weaken in value to the British pound, a forex trader will sell U.S. dollars and buy British pounds (a currency pair). If the pound rises in value, the purchasing power to buy U.S. dollars has increased.
Like the broader stock market, forex trades are placed through a broker or market maker. Orders can be placed online, wherein the broker passes it along to a partner to fill the position. When an investor closes the trade, the broker debits or credits the account with the loss or gain.
Unlike most financial markets, which are tied to specific business hours, forex, because there is no central marketplace for currency exchange, is open 24 hours a day, five days a week. Forex trades are conducted worldwide at major financial centres such as New York, London, Zürich, Paris, Frankfurt, Tokyo, Hong Kong, Singapore, and Sydney.
Forex Trading for Beginners
Forex trading is the largest financial market in the world. Each day, the global foreign exchange market trades more than $5.0 trillion in volume. The New York Stock Exchange, the largest stock market in the world, trades daily volume of about $22.4 billion.
Because there are fewer currencies in the world than stocks and commodities to trade, many believe that Forex trading is an easy alternative to investing—it isn’t. To become a forex trader in Toronto, you need to have a comprehensive understanding of the different factors and events that impact global currencies.
Investors also have to have focus and patience. Forex traders access as much data as possible to analyze currencies and factors that impact a currency’s true value; much like an investor would to figure out the true value of a publicly traded company.
Unlike the stock market, however, there are no bull markets or bear markets with forex. That’s because global currencies rise and fall in relation to each other all the time. A forex trader in Toronto can potentially make money in either direction.
There are many other benefits to learning forex trading in Toronto. Unlike stocks, forex trades have low, if any, commissions and fees. Forex trading eliminates the middleman and allows forex traders to trade directly with the market responsible for pricing a currency pair.
With forex trading, there are standard, mini, and micro lot sizes. In the futures market, contract sizes are determined by the exchanges. A standard contract for silver futures is 5,000 ounces. In forex, investors can determine their own position size.
If you learn forex trading in Toronto, you’ll discover that no one can ever corner the forex market. Where some stocks can be manipulated because of their small volume, with forex, because the market is so massive and has so many participants, no one can control the market price for any extended period of time. On top of that, forex trading is leveraged; for a small deposit, a forex trader can control a much larger total contract value.
The more an investor learns about forex trading, the better equipped they’ll be to analyze global currencies and profit, minimize losses, and protect capital. If you’re looking to become a forex trader in Toronto, the professionals at Learn-To-Trade.com will teach you how to analyze forex charts using technical indicators and show you how to use orders, like stop-loss, to minimize losses
With Learn-To-Trade.com’s hands-on approach, members will participate in simulated forex trading with no risk and have real-time access to the global forex market using the same powerful software that professionals use.