When you travel to another country for work or pleasure, one of the first things you should do after getting your passport stamped is exchange dollars for another currency at a Foreign Currency Exchange.
After all, you don’t want to be turned away from a bustling cafe on Rome’s busy streets because you don’t have any Euros.
However, there is more to the Foreign Exchange Market, which is known for.
But there’s more to the Foreign Exchange Market, which is called “forex” for short, than just trading one currency for another so that travelers can make purchases during trips.
Did you know that it’s a unique investment and trading opportunity?
Forex traders are simply investors in currencies. Investors aim to profit by buying a currency they believe will increase in value (relative to another currency), or by selling a currency that they believe will fall in value.
What’s more, one advantage of forex is that it offers more leverage than any other financial market, meaning that investors can make sizeable returns on investment with just a small amount of trading capital. Later on in the article, we break down an example of a forex trade to further explain this advantage.
But there are downsides, including managing that leverage and other associated risks.
So how does this form of investing work? And is it right for you?
Keep reading to learn everything you need to know about forex for beginners.
What is Forex?
If you’re wanting to know forex for beginners, let’s start with this: the forex market is unique. According to DailyFX, the foreign exchange market, with an average daily turnover of $5 trillion, is the largest financial market in the world. For comparison, the US stock markets trade less than $1 trillion daily.
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Currencies Traded in the Forex Market
The instruments traded in the forex market are currency pairs. Whenever you make an investment in the forex market, you are essentially buying or selling one currency against another. Currency pairs trade the world’s major, or most widely used, currencies:
Originally published at : Wealthfit