What is currency trading?
Currency trading, also known as FX trading, is the exchange of currencies between two parties at an agreed price. The trading parties may be financial institutions, multi-national corporations, banks, central banks, hedge funds, money changers, insurance companies, speculators, or individual traders. Currency trading is done in pairs. A currency pair consists of a base and a quote currency – for example, the currency pair of EUR/USD consists of EUR, which represents the base currency, and USD which represents the quote currency. The exchange rate of EUR/USD at 1.1630 simply means that to own one euro, you need the equivalent of 1.1630 in US dollars. The ultimate goal of FX trading is to identify the correct direction of the markets. It’s all about buying a financial instrument low and closing the position higher, or selling a financial instrument high and closing the position lower. To begin, traders choose a trading platform to trade currencies on. There are many different trading platforms to choose from, including MetaTrader Once the trader identifies a trend in the market, they place a buy or sell order on their preferred trading platform. If the trader expects a currency pair to rise, they place a buy order to profit from the increase. If a trader expects the opposite, they will place a sell order, to benefit from the fall. Because the forex market is decentralised, currencies are traded in financial centres across the globe, in New York, London, Frankfurt, Tokyo and Sydney.
FX Trading - The Exchange of Currencies
Traders can now easily access the markets thanks to devices like smartphones, and as a result currency trading is becoming increasingly popular. The user-friendliness of trading platforms and the 24-hours/five-days-a-week trading schedule makes currency trading highly appealing. The markets’ high liquidity means traders can trade almost any volume at their desired price, and are not likely to experience price manipulation. If that wasn’t enough, a daily turnover of about $5 trillion, the availability of leverage, and educational resources provided by some brokers attract a huge number of traders across the world. There are many different strategies which are commonly used among traders: 1. Day Trading 2. Swing Trading 3. Position Trading 4. Scalping 5. Hedging 6. Trend-following 7. Breakout 8. Range-bound 9. Channel Trading 10. Discretionary Trading 11. Mechanical Trading 12. Automated Trading 13. Financial News Trading Discover more on our Forex Trading Strategies page.