Published On: Thu, Aug 9th, 2018

Using Currencies to Help Build Wealth

Most investors are familiar with the stock market, which enables individuals to buy and sell shares of stock in the open market; however, there is also another market for trading called the foreign exchange market (FOREX), which is the largest financial market worldwide. In fact, according to reports, the trading volume for Forex averages more than $4 trillion US dollars per day as compared to the roughly $200 billion US dollar daily average for the stock market, causing many investors to increasingly turn to Forex trading, seeking an intriguing, new dimension of investing and trading.

photo/ Gerd Altmann

What is Forex Trading?

There are hundreds of different types of major currencies worldwide, including the US dollar, the British pound, the Japanese yen, the Swiss franc, and more, each which carry different exchange rates, or worth, at any given time.

The exchange rate is the value of a nation’s dollar in relation to another nation’s dollar or the amount of foreign money you can purchase or exchange with another currency. The exchange rate or value of a currency is influenced by various factors, including supply and demand, interest rates, inflation rate, political stability, the general state of the economy, and more. In other words, the more stable the nation is as a whole, typically the stronger the money value.

The Forex market enables investors to trade one currency for another and capitalize off the exchange rate. For instance, let’s say you are a trader who is predicting the US dollar will outperform the European Euro, then you would place a bid for the EUR/USD currency pair. When the quote currency, which is the US dollar, increases in value over the euro, which is the base currency, then the trader can sell the euros to purchase the US dollar and make a profit.

In foreign exchange markets currency can be traded 24 hours a day, 5 days a week, via forwards, option contracts, spot transactions, and more. Some Forex transactions can also be made using bitcoin.

Why Forex Trading?

Because the foreign exchange market is so major, it offers investors the ease of trading currencies, which means they can get into and out of positions effortlessly. This ease of trading also means it costs less for financial institutions to establish trades, which equates to lower trading costs.

A large market also means a more stable market because it can more easily absorb huge volumes of trading without causing sharp fluctuations in price. Furthermore, since the Forex market is accessible 24 hours a day, 5 days a week, it means that traders also have more options for buying and selling as other traders, broker-dealers, banks, and other financial entities are also looking to trade currencies.

Who uses Forex Trading?

Investment managers, hedge funds, and pooled funds, which make up the second largest collection of participants on the foreign exchange market, use currencies for large accounts, such as retirement plans and financing, during which time, like individual investors, they make or execute speculative Forex trades as part of their wealth building strategy. Marketspremium.com

Meanwhile, Forex currencies are commonly utilized by banks to make speculative trades for clients or to diversify a portfolio; central banks often use currencies to control inflation, and corporations use currencies to limit risk and for worldwide business.

To get started trading on Forex is simple. You can purchase  Forex trading software through a broker, such as MarketsPremium, and it even helps you with Forex trading analysis, including currency prices, charts, market news, and more, to help you get started. Additionally, all the information provided is available in real time. Some brokers also offer a demo account as well as low trading costs to help build your confidence before making more serious trades.

Author Bio:
James North is a young entrepreneur, who has accomplished a great feat in the world of marketing and advertising. He is the husband of a accomplish writer, and the father of two young adults. He has been contributing to digital platform for quite some time now. He loves to share his innovative ideas and thoughts so that readers could be benefited. He loves playing cricket at his leisure time.
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  1. Homepage says:

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  2. Michael Latham says:

    I am into trading for year and a half now. I am reading a lot of materials related and it’s quite an investment(Turkish lira strenghtening on the foreign exchange this month. Sadly, though, we make profit out of war actions 🙁

  3. Minnie Ackley says:

    Interesting topic! I am into investing for a year now and I find such article really useful! Thanks!

  4. […] it comes to trading, choosing a platform can delay the process because it becomes difficult to choose from the many […]

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