Forex trading is the short term for foreign exchange trading. This implies towards exchange of currencies of various countries. Foreign exchange trading is no more about physical swapping of currencies. The advent of Internet has made it easier for forex traders to conduct currency exchange with the help of computer and Internet.
Objective of Foreign Exchange Trading:
One of the obvious objectives of currency trading is the worldwide commercial operations that take place in the course of normal international business transactions. There are numerous companies that conduct daily sales with oversees clients and thus require buying or selling foreign exchange. To cite an example, if an American company wants to purchase products from a European company, the American dollars would require the conversion into Euros to accomplish the purchase.
Forex trading is also conducted for the purpose of fiscal speculation. Forex traders earn lucrative profit from forex fluctuations. There are numerous individual as well as institutional forex traders who conduct their trading on daily basis. A fact is to be understood that forex trading always takes place in dualistic currencies. Exchange of any currency would take place only in conjunction with other currency. The values of currency exchanges are recorded in ‘pips’ that is one-hundredth of a per cent.
An Investment Activity
Forex trading has become a lucrative investment activity that is inviting many entrepreneurs and traders. Small as well as big forex traders are conducting trade over numerable foreign currencies such as US Dollars, British Pounds, Euros, the Australian Dollar, the Japanese Yen etc. earlier forex trading was restricted to banks and the privileged ones, however, now any one can open a currency trading account with nominal fee and minimal documentation.
- Forex trading can be done with ease and convenience. There is no need of any formal training, customers, infrastructural set up, employees etc. With only computer and internet as prime requisites, the overheads become almost negligible.
- This trading needs only a humble investment in order to test the ground before making large investment.
- With proper understanding of current trends and forex strategies, traders can tap the potential of currency trading. With consistent and judicious training, lucrative profits can be made with short time.
- There is complete liberty of time and place in this trading. The traders can conduct trading from anywhere and anytime.
- Foreign exchange world is known to be volatile and turbulent. During times of economic recession, or any other national or international event, the Forex trading may have to face unpredictable trends and practices. Experienced traders keep calm during turbulent times and wait for resumption of normalcy.
- Greed must not prevail in the minds of traders lest too much can be lost in a single trade. This can be avoided by judicious risk management for alleviating losses. Understanding the nuances of currency trading and its associated trends and indicators can help in overcoming traders’ psychological inhibitions.