Forex is fast emerging as one of the most popular means of online investment. There are many new traders who are foraying into the market while there are others who already exist and want to make the most of the financial returns. We will discover the reasons why so many investors are willing to try their fortune in Forex trading, but let us learn more about its basics at first.
Here are a few attributes of Forex trading that you should know about before you start practicing. The various aspects of this specific type of trading that you should be aware of are the kind of transactions involved, the main currencies used, some of the basic terms associated with this kind of investment and others.
Types of Transactions
The primary categories of market transactions are:
- Swaps- 39 percent
- Options- 5 percent
- Spot- 48 percent
- Futures- 1 percent
- Forwards- 7 percent
Primary Currencies Involved
The US dollar is the most important currency in the market, where 40 percent of the business is conducted with its help. Other significant currencies are the Swiss Franc, Japanese Yen, Australian Dollar, British Pound, New Zealand Dollar, Euro and Canadian Dollar.
There are a few other important aspects of this kind of currency trading that beginners should know about. As you conduct due research on the Forex market, you will come across a number of terms associated with it. Let us learn about a few of them.
- Price Transparency – These are quotes that can be used by all traders.
- Spot – It refers to the cash price which does not include the interest.
- Base Currency – It refers to the currency that the participant will use to buy another currency.
- Quote Currency – It is the currency that is bought with the base currency.
- Open Order – It is implemented when the foreign exchange market touches the fixed price.
- Ticker – It demonstrates the history of a particular currency in a chart or table format.
- Premium – In the foreign exchange market, the premium refers to the entire amount by which future currency values will exceed spot prices.
- Forex Demo Account – Participants who have just started investing in the trade can access the Forex demo account to practice trading with the help of the present market figures and virtual cash. If you are thinking of participating in this business, you should use this account in a bid to hone your skills.
- Resistance – It technically implies the price tier at which participants usually sell.
Reasons Why Forex Has Become Popular Among Traders
A few reasons behind the popularity of Forex trading are mentioned below:
- This kind of investment allows investors to take advantage of high leverage which means they can trade higher volumes than what they have in their account.
- No commission for middlemen is required here.
- It is the biggest trading market in the world that offers excellent liquidity (business worth $2 trillion dollars is being conducted every day)
- Many experienced traders see this as a means of improvising on their portfolio