What Is Forex Trade? 5 Untold Forex Trading Benefits + Expert Tips For Higher Forex Profit

Trading is risky as well as complex. If I relate this context with Forex trading, it gets sky-crapping.

However, Forex trading is done by millions of people, and alone the UK, as a hub of forex trading, is the leader in this regard, having more than 280,000 online traders.

Other than the UK, Asia, Europe, North America, the Middle East, and South America also have forex traders.

Yeah! The world is shattered with forex, forex trading, and the forex market.

👉 Why Do We Need Foreign Exchange?

Forex exchange is required for a number of reasons.

As the world is co-related with trade and commerce. Multiple currencies are helpful in completing the goals of individual objectives and businesses.

Let’s understand a couple of instances.

If you are living in the United States and want to buy cheese from India, either you or the company from where you order cheese will have to pay the Indian currency for the cheese in Rupees (INR).

The same goes for travelling. An Indian tourist in Egypt can’t pay in rupees to see the pyramid as it is not locally accepted currency. The tourist needs to pay locally accepted currency, in this case Egyptian pound (EGP).

And even not this, Foreign exchange imposes a critical role on society and global economic development. Primarily, it allows flexible currency conversions and facilitates buying goods and services (across borders), financial transactions, and investment.

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👉 Why Trade Forex? Advantages of Forex Trading

Though FX offers a multitude of features and seamless lifestyle moving convenience to people and groups of entities, it provides many advantages in a nutshell.

Let’s have a clear look at the forex trading benefits:

High Liquidity

As the forex market is enormous, liquidity is standard.

The biggest reason why this market is so liquid is that it is tradable 24 hours a day, five and a half days a week with a one-click buy and sell facility and that won’t affect the prices much.

Additionally, no market has the potential of having deep liquidity. Hence a big reason for being the world’s largest and best financial market.

Feasible Transaction Cost

The buying and selling of the forex are done via foreign exchange brokers and traders that charge commissions. Besides, the bidding on forex incurred less than 0.1% under stable market conditions. However, it could go to 0.07% based on the leverage factor.

That sounds very feasible. The charges don’t impact the ideology of forex exchange at all, hence users enjoy this advantage highly.

No Fixed Lot Sizes

In Forex, a lot refers to the unit of the base currency.

There are four lots each representing a specific sum of the units of the currency. Those are – Standard lot, Mini lot, Micro lot, and Nano lot.

A standard lot of foreign exchange has the highest unit of currency, say 100,000 units, and is also observed as “1 Lot”.

While the other three lots have lower units such as –

• Mini-lot has 0.1 lot (10,000 units)
• Micro-lot has 0.01 lot (1,000 units)
• Nano-lot has 0.001 lot (100 units)

A 24-Hour Market

The foreign exchange market never sleeps. In alternate terms, you don’t have to wait for the opening bell to start Forex trading.

This market runs 24 hours a day on weekdays across the globe in different time zones which makes investors and interest forex users use it at their convenience. Say morning, noon, night, during breakfast, or sleep time; you can trade anytime at ease.

No One Can Own The Market

The worth of the forex global market was estimated at a quadrillion, which is significantly huge (like the galaxy).

And according to BIS last year’s report, the market consists of trillions of transactions per day which is another shockwave to hear.

This gives a clear idea that the market is so enormous that a central bank or mighty zillionaire cannot control the market price, even not for a short period of time.

These were some advantages of the foreign exchange market.

Now let’s understand how to get started with currency pairs and the exchange market.

👉 How To Get Started On The Forex Journey?

Till now, after hearing so much nostalgia, it seems that the forex market or foreign exchange trading is adventurous.

Well, indeed, it is adventurous as well as witty.

Want to delve into the wonder of the Forex journey? Here’s what you need to know about this market – Forex Terminology!

Forex account: Forex account acts as a home for all your global trading and functions. Based on lot sizes, there are three types of forex accounts. Namely, Micro forex account, Mini forex account, and Standard forex account.

Bear market: It is an observation in which the market signifies the downtrend and result of the depressing economic fundamentals such as financial crises.

Bull market: It is another observation in which the market signifies the uptrend and result of the optimistic news of the economy. Generally, the price increases for all currencies.

Leverage: This refers to lending money from brokers. This is done to multiply returns. Also with the purpose to make instant trade for higher profits.

Margin: Margin is a limit set on the spending of currencies aside from an account. The agenda is to help assure the broker that traders remain on a track of well-money-making surroundings.

Lot size: In the case of forex, the trading occurred on a principle of lot. And there are different lot sizes that give convenience for buying and selling.

Pip: Stands for “percentage in point” or “price interest point” expressed to four decimal points. It refers to minimum price movement, made in the currency market. 1 pip is equal to 0.0001. 100 pips are equal to 1 cent, and 10,000 pips are equal to $1.

Spread: A spread is the deviation between the bid (sell) price and ask (buy) price for a currency.

Sniping and hunting: Sniping and hunting is the purchase and sale of currencies proximate predetermined points to surplus earnings.

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👉 Basic Forex Trading Strategies & Tips (For Beginners)

Forex trading strategies are built from experiences by a number of experts. Foreign exchange strategies are helpful in getting deep knowledge of the market, the ins and outs of trading, and more.

Sometimes, technical analysis such as breakout and moving average kind forex strategies are approached to fine-tune the idea to get success.

However, the strategies are deviated and used based on the duration and numbers of trading. The four types of forex strategies that alludes to this context are as follows:

• Scalp trade: This strategy is also known as scalping, designed to profit from small price changes (pips) and generally the effect is held for seconds or minutes at most.
• Day trade: This strategy is bit forward and are short-term trades in which the positions are held for the same day and traders liquidate accordingly. The duration of a day trade can be hours or minutes.
• Swing trade: Swing trade strategy is deviated by external factors such as announcements by the government or times of economic chaos. The position is more than a day i.e. the traders may hold the positions for days or weeks.
• Position trade: It is observed as a long-term trading strategy in which the traders hold the currency for a long period of time, say for more than 4 to 6 months or even years. It requires high fundamental analysis and skills to do a profitable trade.

Now, some tips and suggestions you might be interested to know to learn how to do profitable forex trading.

👉 Frequently Asked Questions

Is the forex market volatile as the stock market?

The forex market is different from the stock market. However, the forex market is the most liquid market considered than any other market, and the forex market tends to be less volatile.

Are the forex market regulated?

It depends on the jurisdiction. For instance, the United States which has sophisticated infrastructure, they have a market to conduct forex trades. The National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC) have the authority to control the forex market.

Which currencies can be traded in foreign exchange market?

Every country’s currency can be exchanged and traded in the Forex market. Based on last year's stats, the United State dollar, Euro, Japanese Yen, and Sterling are the most traded currencies in the limelight of the Foreign exchange market.

How to get started with forex trading?

It’s simple. Primitively, gather knowledge and information about the market and currencies. Educate yourself about the market’s terminology and working functions. Next, develop a strategy to win a profitable trade with a risk tolerance level. Finally, open a brokerage account where you can add funds to currency exchange, trade, and investment.