What is Currency Trading and Is It Right for You? The investment markets can easily take the money of investors who believe that trading is easy. Trading in any investment market is exceedingly difficult, but success comes first with the education and training. So, what is currency trading and is it right for you? How Does Forex Trading Works? Currency trading is a 24-hour market that is closed from Friday evening to Sunday evening, but the 24- hour trading sessions are misleading. Three Sessions include the Asian, European and United States trading sessions. The main Currencies in each market are traded almost during the market hours. It means that the certain currency pairs have more volume during the certain sessions. Traders who stay in pairs based on the dollar will find the most volume in the U.S. trading session. Currency is traded in various sized lots. The micro-lot is 1,000 units of currency. If your account is funded in U.S. dollars, a micro-lot represents $1,000 of the base currency, the dollar. A mini lot is 10,000 units of base currency, and a standard lot is 100,000 units. Pairs and Pips All Currency trading is made in pairs. Unlike the stock market, where you can buy or sell single stock, you have to buy the one currency and sell another currency in the forex market. Next, all the currencies are priced out to the fourth decimal point. A percentage or pip point is the smallest increment of trade. One pip typically equals to 1/100 of 1%. Retail or New traders often trade currency in micro lots, because one pip in a micro lot represents just a 10 cents move in the price. That makes losses easier to manage if a trade doesn't produce the intended results. In a mini lot, one pip equals to $1, and that same one pip in a standard lot equals $10. Some of the currencies move as much as 100 pips or more in the single trading session making the potential losses to small investor much more manageable by trading in micro or mini lots. Far Fewer Products The majority of the volume in currency trading is confined to only 18 currency pairs compared to thousands of stocks that are available in the global equity markets.
Although there are other traded pairs outside of the 18, the eight currencies most often traded are the U.S. dollar (USD), Canadian dollar (CAD), euro (EUR), British pound (GBP), Swiss franc (CHF), Australian dollar (AUD), New Zealand dollar (NZD), and the Japanese yen (JPY). Although nobody would say, that currency trading is easy, having far less trading options makes the trade and portfolio management an easier task. What Moves Currency? An increasing amount of stock traders are taking an interest in the currency markets because many of the forces that move the stock market also move currency in the market. One of the largest is supply and demand. When World needs the more dollars, the value of the dollars increase, and when there are many circulating, the price drops. Other factors like interest rates, new economic data from the largest countries and geopolitical tensions, are only a few of the events that affect the currency prices. The Bottom Line Much like anything in investing market, learning about currency trading is simple but finding the winning trading strategies takes a lot of practices. Most of the Forex brokers allow you to open a free virtual account that allows you to open a free virtual account that the allows you to trade the virtual money until you find the right strategies that work.