The foreign exchange market is highly volatile and highly competitive. In previous years it was primarily traded by central banks, governments, hedge funds, banking institutions and large corporations. However, with the online nature of the market retail traders are increasing in size on the foreign exchange market.
Entering the foreign exchange market
Before you enter the forex trading market, you should be sure that you will be able to handle the fast-paced movements. You also need to determine the level of risk you are willing to take with your trades. The amount you have available as an initial capital investment amount will determine the type of account you will be able to open.
Once you have considered all these factors, and you decide that you wish to venture into this financial market, you should find a suitable training course or obtain books to learn everything you possibly can about the market. It is possible to find online courses, or you could opt for a mentorship programme if you intend entering the market on a full-time basis. This will give you a solid grounding in this market. If you do not wish to spend money on training, you could undertake self-training. You will not be short of information on forex trading online.
It is possible for trade in this market as there are a lot of available opportunities, but to do so effectively you should get to know as much as you can about the market before you commence trading. You need to get training and ensure that you have a trading plan and strategy in place. This will allow you to be a successful trader.
Foreign exchange market movements
When you are in the market for foreign currency to use whilst on holiday, the fluctuations in the rates appear to be huge. However, the daily fluctuations are actually really small. Most of the currency pairs move by under a cent every day. This represents a change of less than 1% of the value of a particular currency. This small change in price makes this one of the least volatile markets in the financial marketplace.
Leverage on the foreign exchange market
The small movements in currency value push traders to rely quite heavily on leverage to boost the value of the movements. In this financial market, leverage levels can be as high as 400:1. You must be aware of the risks involved in high leverage. However, the fact that this market trades all day and night, for five days every week, brokers have been able to offer leverage as a standard to improve the attraction of the movements in currencies.
It is this high leverage and the liquidity that has helped make this such an attractive market to enter. It is possible to hold your positions for several months or you can choose to open and close them within minutes. The prices of currencies are based on supply and demand and it is not possible to manipulate these prices easily. The size of the market makes it extremely difficult for price manipulation, even by central banks and governments.