Investment markets hold a special appeal to many individuals, but the markets are extremely difficult to trade in profitably. Your first port of call if you wish to enter a financial market is to obtain suitable training and practice as much as you can.
The forex Australia market is a massive market where it is possible for traders to attain profits, provided they are aware of the risk levels involved in their forex Australia trades.
What is Forex Australia?
The currency trading market is active 24 hours a day and is closed between Friday and Sunday evening. These hours may be very misleading though. The trading hours are spread across three sessions that cover the US, Asian and European trading times. A couple of the trading sessions overlap and it is during these times that trading of the major currencies is quite heavy. This means that there are particular pairs that experience more volume during certain sessions. If you make a choice of a currency pair which includes the US dollar, you will notice that the trading volume for that pair will be high during the US session. This applies to the Asian and European markets where the most activity for their particular sessions will be the respective currencies.
Pairs and Pips
All trades are done in pairs in this financial market. When you trade in the stock market, you buy and sell a single stock, but when you trade in the currency market, you buy one currency and you sell another. Most global countries price their currency prices to four decimal points. The one exception to the rule is the Japanese yen which indicates its price to two decimal points. The smallest movement in trades is called a pip. The value of a pip is normally the equivalent of a hundredth of one percent.
Many traders who have no experience in this market opt to trade in the smaller lots which are called micro lots. One pip in a micro lot is the equivalent of 10 cents. This allows any losses that are experienced to be easily absorbed. A pip in a mini lot is equivalent to $1 and the value of a standard lot pip is $10. It is possible for a currency pair to move by 100 pips in a trading day which makes the potential for losses extremely large for beginners in the market. This is the reason why it is recommended that beginners should not commence trading in standard lots.
In the stock market, you have the option to choose from thousands of stocks. In the currency market, you are limited to approximately 18 currency pairs and all the combinations. You do have the option of trading other pairs apart from these 18, but the most traded currencies are the majors. This does not mean that it is easier to trade in the currency market, but having fewer options makes it easier to manage your currency portfolio.
Currency movements are based on supply and demand. Where a currency experiences a high global demand, its value will increase. Once there is too much of that currency available in the market, its value will decline.