When people become involved in currency trading, then they are becoming involved in Forex. When it comes to investments currency trading, Forex is the largest market in the world. This comes as a surprise to some, as they assume the stock market to be the biggest market.
How Does Forex Trading Work?
For the non-investor, they may on occasion have to utilize a different currency than what they are used to. For example, if someone is going to spend some time in Mauritius then they may want to change their currency into rupees, which is the currency for this island. For easy conversion, they could use a currency calculator to see how their money translates into rupees.
Forex trading is more complicated than this. Currency trading is carried out 24 hours a day but is closed from Friday night to Sunday night. Trading sections are comprised of three sessions which are Asian, United States and European sessions.
Pairs and Pips
Currency pairs mean taking two currencies from two different countries, both having exchange rates. Trading in the Forex market takes place by currency pairs, no matter whether one is buying or selling, or just trading. The pairs mean you have to buy one currency and sell another. The pip refers to the percentage point.
Those that are just beginning to get into Forex usually trade in micro lots. The reason being is because a pip equals $1. Whereas in a standard lot that same pip would equal $10. So there is less risk of a loss with the micro lots. A single trading session depending on the currency could result in a 100 pips or more. At $1. this type of loss is more manageable for the small investor.
There is a lot to learn about Forex but many find it a profitable form of investment.