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What is Forex trading?

What is Forex trading?

Forex is the biggest financial market in the world. Every day, trillions of dollars are traded across an international, 24/5 marketplace.

But what is Forex trading? It’s the buying and selling of global currencies such as Pounds, Euros and Dollars. Forex trading isn’t just done by huge businesses though – these markets are traded by retail customers around the world and they are responsible for material volumes of transactions.

As Forex is a global market, the prices can be changed by:

·       News about inflation

·       Interest rate policy

·       New laws that may affect trade

·       Employment figures

·       Demand for imports and exports

With so many traders and so much money exchanging hands, price changes can, and do, happen quickly, making Forex fast-paced and volatile and not for the faint hearted.

How to trade Forex

Now you know what Forex trading is, you might want to have a go yourself. So, how do you trade Forex? And what should you look out for?

First, you need to decide which product you want to trade. In the Forex markets, the products are known as currency pairs, this is where a trader will speculate on the value of one currency against another.

At Trade Nation, we have over 30 pairs for you to choose from. When choosing the pair you want to trade, there are a couple of things to think about:

·       How stable are the economies of each country? A country’s stability is mirrored in the value of their currency.

·       Are there any big announcements due from or that might relate to that country? Elections, interest rate policy decisions and economic data releases will cause price changes in their currency.

·       How volatile has the currency pair been historically? This important information will help you develop your trading strategy.

During times of stability price changes within a currency pair can be relatively small. When there is uncertainty in the market prices can change very quickly so it is important to stay in touch and to make use of the Trade Nation risk management tools.

Why trade Forex?  

With so many markets to trade, why trade Forex? There are a few reasons to consider:

·       You can start trading with only a small balance in your account.

·       It’s a 24/5 market with no fixed location, so you can trade whenever you like, wherever you like.

·       It’s a leveraged product, meaning you only need to make a small deposit to access products of a large value.

·       It’s the most liquid market in the world; good levels of liquidity increase the trading opportunities and reduce the risks of market slippage.

As with all other forms of leveraged trading, there are risks involved and it is important you understand these before you start to trade with us.

Who trades Forex?

If you have a smartphone, tablet, laptop or PC that can connect to the internet, you can trade Forex.

And there are thousands of others just like you who speculate and invest in the Forex markets around the world, either on an ad-hoc basis or as their full-time job.

Where to trade Forex

Forex is an international market with hundreds of thousands of daily participants.

Forex has no central hub and is sometimes referred to as Over the Counter (OTC) trading because it can be done anywhere, at any time throughout the 24/5 opening hours.

Although there are no physical locations that act as centres for Forex, cities such as London, New York, Singapore, Tokyo and Zurich are considered hubs of Forex trading and a large percentage of the daily volumes are transacted in these regions.

Read next: Forex trading explained

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