What is currency trading.
Also referred to as foreign exchange, FX or Forex, currency trading is the trading of one currency against another. In terms of trading volume, the currency exchange market is the world's largest market, with daily trading volumes in excess of $1.5 trillion US dollars. This in orders of magnitude is larger than the bond or stock markets. The New York Stock Exchange, for example, has a daily trading volume of approximately $50 billion.
Why trade currencies.
Currencies are traded for hedging and speculative purposes. Various market participants such as individuals, corporations, and institutions trade forex for one or both reasons.
Corporate treasurers, private individuals and investors have currency exposures during the the regular course of business. The FXTrade Platform is an ideal platform to hedge any such exposure. An investor, who has bought a European stock and expects the EUR exchange rate to decline, can hedge his currency exposure by selling the EUR against the USD.
Currency markets are ideally suited for speculative trading. The foreign exchange market has a daily volume in excess of 1.5 trillion USD, which is 50 times the size of the transaction volume of all the equity markets taken together. This makes the foreign exchange market, by far, the most liquid and efficient financial market of the world. Thanks to its efficiency, there is little or no slippage of market price for the execution of even large buy and sell orders. Traders are able to take advantage of intra-day volatility thanks to the low spreads and enter positions for short time periods, such as minutes and hours. Unlike equity trading, where restrictions limit a trader's ability to profit from a market down turn, there are no such constraints on currency trading. Currency traders can take advantage of both up and down trends thus increasing their profit potential.
Where can I trade currencies.
There are a number of very reliable brokers who either act as middle men to allow access to the Forex market, or can connect straight into the markets with an ECN.
When can I trade Forex.
The three major market centers for forex are Asia (Tokyo), Europe (London) and North America (New York).
The Asian market opens at 1:00am GMT (although New Zealand and Australia open about 1 hour earlier). At 7:00am GMT, the European market opens. London, the most active center for forex, opens at 8:00am GMT. Finally at 1:00pm GMT, the North American market becomes active.
The most liquidity and turnover occurs when London and New York overlap, which occurs between 1:00pm and 5:00pm GMT. The least liquid period occurs when London finishes and before Asia opens.
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