Forex, which stands for foreign exchange, is the largest and most liquid financial market in the world. Operating on a 24/5 basis, forex trading takes place ‘over-the-counter’, meaning that there is no central trading location.

In today’s highly electronic age most currency trading takes place online, though some transactions are carried out over the phone. There are countless currencies available to trade with, including the world’s major currencies down to more exotic and volatile currency pairs.

Forex trading is fairly straightforward to execute though many novices perceive it as a complex and bewildering industry that is exclusive to industry specialists. This is not the case and with a little patience, determination and research, tackling this lucrative industry has never been easier.

Where Do You Begin?

One of the first stages of online forex trading is to set up a forex trading account. which requires you to deposit an initial amount as specified by your selected forex broker. Once you have made your deposit, the currency trading world is available directly at your fingertips.

How Does Forex Trading Work?

When trading forex. investors must select which currency pairs they are going to trade with. Currencies are always quoted in a pair, with the first currency being the base currency and the second being the quote currency. There are numerous tradable currencies and the ones selected depend on the level of risk the trader is willing to take, as the more exotic currency pairs are considered more volatile and unstable.

From here, traders must simply decide which direction they believe a currency is going to move in. For example, if an investor believes that the price of a currency is going to rise (appreciate), he/she will buy that currency at the ask price. If the investor believes it is going to fall (depreciate), he/she will sell it.

Over time, the purchased currency pair will shift in value, resulting in either a profit or a loss. To calculate any profit made from a trade, the change in prices is examined. If the market has moved in the investor’s favour by a certain number of pips, then a profit is generated.

What Factors Affect Currency Movement?

There are numerous factors affecting currency movements, including political, economic, monetary and environmental. When trading forex, investors can perform fundamental analysis, which enables them to analyse live market news to gain a better idea of which direction a currency is headed in.

Currency trading is by nature a risky yet profitable activity, and it is therefore advised to approach the industry armed with common sense and good knowledge. If need be, set up a demo trading account first to get a feel for the market, and make use of all forex trading services as provided by your selected forex broker. to educate yourself about this exciting and lucrative industry.