Forex, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world’s currencies trade. The forex market is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion. All the world’s combined stock markets don’t even come close to this.
How can you benefit from exchange rate changes?
Exchange rates change all the time, and forex traders attempt to profit from these changes. Here’s a quick example:
Let’s say you travel abroad and you go to an exchange and use $500 to buy euros. After a week, you come back (without spending a single euro) and exchange your euros back to dollars – but you receive $505, because during the week, the exchange rate changed. This is a profit of 5 dollars, which you made by trading currencies.
Of course, nowadays you don’t need to leave the house to invest in the price of currencies – and you don’t even need to actually buy the currencies. Thanks to online forex trading anyone can invest in the price of different currencies from home – or even from their smartphone – and potentially profit from changes in price.
What is a trader?
Wikipedia described a trader as,
A trader is a person or entity, in finance, who buys and sells financial instruments such as stocks, bonds, commodities, derivatives, and mutual funds in the capacity of agent, hedger, arbitrageur, or speculator.
What is a forex trader?
It’s a person who actively takes part in speculating in the forex markets, specifically. Forex traders are people who invest in the markets but specialise only in the currency markets.
Many people shoehorn forex traders as a single type of ideology of speculating the markets.
This is untrue.
The definition of forex trader is too broad, when in reality there are many sub-categories.
That is the beauty of forex trading.
You can literally manipulate this life skill and mould it to suit you.
Don’t want to focus on the markets all day for 5 days straight? Stay away from scalping and choose to trade long term – picking trading ideas that could span out over the next few months. These people tend to incorporate economic news and data points more.
Don’t want to wait a few months to potentially make a profit? No problem. You can focus on trading in a smaller time frame.
You see, thanks to the global economy and now that we are connected via the Internet; the forex markets are open for 24 hours a day between Monday and Friday.