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The forex market is one of the most popular global investment packages with the largest amount of capital invested in it. Records show that over 3.8 trillion has been invested into the forex market with over one trillion traded daily. This makes the market very volatile. With the proliferation of online forex brokers today, it is now possible for individuals to trade forex from the comfort of their homes. This has increased the number of forex traders across the globe. While traders look up to making profits from their forex investments, the fact remains that there is no guarantee for profits; as the trader can as well lose his investment over time especially when he makes the wrong predictions. Making profits from forex trading, therefore, comes as a result of making the correct predictions for the future prices of the financial instruments traded. This work has therefore examined the meaning of forex trading and how the individual can go about the business of trading the forex market today.
What is Forex trading?
Forex is a global exchange market that allows traders to exchange currencies and other financial instruments in the hope of making profits from their future price difference. Often making profits from forex comes as a result of making the correct predictions for the prices of the assets purchased. The term forex is in itself an acronym for ‘foreign exchange’.
What is traded in Forex?
There are six major financial instruments traded in the forex market today. They are discussed below:
A. Currencies: We have three divisions of currencies traded in the forex market such as: Major, minor and exotic currencies.
- Major currencies: The major currencies are the most traded in the market today. Hence, we have four major currencies as Euro, the US dollar, the British pound, and the Japanese yen.
- Minor Currencies: The minor currencies refer to other strong currencies outside the major currencies. They are the second most traded group of currencies in the market. Examples are the Swiss Franc, New Zealand dollar, Canadian dollar, etc.
- Exotic currencies: This refers to indigenous currencies. They are less popular compared to other groups of currencies. Examples are Norwegian Krone, Indian Rupee, etc.
C, Commodities: Here find some of the highly valuable physical products such as Gold, Silver, Crude oil, etc.
D. Stocks: This refers to the shares of different companies such as Facebook, Amazon, Google, Zoom, etc.
E. Indices: This refers to groups of stocks or other financial instruments put together as one and offered for trading. Examples are Ger30, Crypto10, Nasdaq, France40, etc.
Where can one trade forex today?
The best place to trade forex is using the best trading forex brokers’ platforms. To trade forex with a selected broker, the trader will first have to create an account with the broker and fund his account after completing the account verification process
Forms of Forex trading?
The forex market can be traded in three major forms such as:
- Spot trading: This involves purchasing the real assets and other financial instruments over the counter. Here there is total ownership of the assets purchased.
- Futures: This is a leveraged form of trading where investors take their positions based on their forecast for the future prices of the assets purchased.
CFD trading: This is the most popular form of forex trading today. Here the trader enters into a contract with the broker to receive as his rewards the price difference in the assets purchased from his entry to exit point. Hence, it is called a ‘Contract for differences’ (CFD)