Currency trading involves the buying and selling of different currencies. It works on the theory that is similar with share market. As we all know that to make a good amount of profit, you have to buy at lower price and sell at higher price, or we can also sell at higher price first and buy at lower price. But this is not as easy as it sounds. You can actually earn profits in currency trading by studying certain market conditions. All you have to do is to analyze the foreign exchange market in a correct way and then enter into a good trade.
But the question that arises is why to go for Foreign exchange trading? There is an alternative to invest in stock market also but here are a few important advantages of currency trading over stock market.
- Twenty four hours continuous trading: Currency trading is done on twenty four hours basis. This market is open throughout the day and night as somewhere in the world, there might be this buy and sell trading that is going on. Traders involved in foreign exchange trading strategy can always get that first hand information and can act accordingly. The currency rate is actually run through telecommunication all over the network of banks twenty four hours a day from 00:00 GMT on Monday to 10:00 pm GMT on Friday. There are ECNs (Electronic Communication Networks) which bring the buyers and sellers together on continuous basis.
- Increased liquidity: There is a superior liquidity in the market as there are always buyers and sellers to purchase and sell foreign currencies. Foreign exchange trading market size is many times bigger than the average of all the stock markets of the world taken together on a given day and the liquidity of such large market ensures price stability. Also Forex trading stop orders could be carried out more simply. This makes Forex trading signal more liquid and permits Forex traders to take benefit of trading opportunities as they happen rather than waiting for the market to open the next day.
- 100:1 high leverage in currency trading: 100 to 1 leverage is commonly available from online foreign exchange dealers, which substantially exceeds the common 2:1 margin offered by equity brokers. This gives them a huge leverage in their trading and presents the potential for huge sum of profits with relatively small investments. Leverage can also go the opposite way and may lead to huge losses if you are not careful.
- Currency trading transactions have no commissions: Foreign exchange brokers can earn money by fixing their own speculation between what a currency could be bought at and what it could be sold at. In difference, Forex traders have to pay a commission fee or brokerage fee for every futures transaction they come in to the view. The currency market is so large that no one individual, bank, mutual fund or a government body can influence it for a long period of time. In forex trading strategy, you can trade between seven currencies but not everyone trades in all.
- Good online support: There are certain trading signals that give indications to the trade. These forex signals are delivered by email, instant messenger or direct to your desktop. Some services even offer auto-trading, allowing you to auto-execute their trading signals direct into your broker account.
Thus it can surely be said that currency trading is becoming immensely popular amongst traders and investors in the modern times due to vast profit potential over traditional forms of investment.