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A Guide to Online Forex trading

Online forex trading - Forex Trading in India: Discover online currency trading in India with Motilal Oswal.<br>

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A Guide to Online Forex trading

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  1. A Guide to Forex Trading

  2. KEY TAKEAWAYS • The foreign exchange market (also known as FX or forex) is a global marketplace for trading national currencies. • Forex markets are the world's biggest and most liquid asset markets due to the global presence of trade, banking, and finance. • Exchange rate pairs are used to swap currencies against each other. Consider the EUR/USD exchange rate. • Forex markets are split into spot (cash) and derivatives markets, which include forwards, futures, options, and currency swaps. • Forex is used by market participants for a variety of purposes, including hedging against foreign currency and interest rate risk, speculating on geopolitical events, and diversifying portfolios.

  3. What Is the Forex Market? • Currency trading takes place on the foreign exchange market. Most citizens around the world, whether they know it or not, are concerned with currencies since they must be traded in order to perform international trade and business. If you live in the United States and wish to buy cheese from France, you or the business from which you buy the cheese must pay the French in euros (EUR). This means that the importer in the United States will have to convert the equivalent amount of dollars (USD) into euros. The same is true when it comes to flying. Since euros are not allowed in Egypt, a French tourist visiting the pyramids would be unable to pay in euros.

  4. Currency as an Asset Class • Currency as an asset class has two distinct characteristics: • You will profit from the difference in interest rates between two currencies. • Changes in the exchange rate will benefit you. By purchasing the currency with the higher interest rate and shorting the currency with the lower interest rate, an investor will benefit from the difference between two interest rates in two different economies. Since the interest rate difference was so big prior to the 2008 financial crisis, it was very common to short the Japanese yen (JPY) and buy British pounds (GBP). A "carry exchange" is a term used to describe this strategy.

  5. Forex Trading Risks • Online Forex tradingis both dangerous and difficult. The interbank market is regulated to varying degrees, and forex instruments aren't standardised. Forex trading is almost entirely unregulated in some parts of the world. • The interbank market is made up of banks from all over the world dealing with one another. Banks must assess and recognise sovereign and credit risk, and they have put in place internal procedures to ensure that they are as secure as possible. This type of regulation is enforced by the banking industry to protect each participating bank.

  6. The Bottom Line • The forex market makes day trading or swing trading in small amounts easier for traders, particularly those with limited funds. Long-term fundamentals-based trading or a carry trade may be lucrative for those with greater assets and longer time horizons. Understanding the macroeconomic fundamentals that drive currency prices, as well as technical analysis expertise, will help new forex traders become more profitable.

  7. HAPPY TRADING!

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