In And Out Information about Foreign Exchange Trading |
Posted: July 17, 2017 |
Have you ever traveled to another country? If yes, then you must have exchanged the money into the currency of the place where you had visited. This means you had essentially participated in the foreign exchange market, as also popularly known as Forex or FX. So, you must have known what Forex is. For people who are not very familiar with the term, Foreign Exchange is a decentralized global market where all the world’s currencies are traded. This includes all aspects of buying, selling and exchanging currencies at current or determined prices. For instance, if you trip to France from India and convert Rupees into Euros, then the foreign exchange rate between two currencies will determine how many Euros you will get in exchange of your rupees, based on demand and supply. Who Trades Forex? Central Banks
Pros and Cons of Trading Forex If you’re seeking to enter the forex market, then you should weigh the pros and cons of the market: Pros: 1. Foreign exchange trading markets are the largest in terms of volume traded in the world and offer the most liquidity, therefore, making it easy to enter and exit a position in any major currencies within a fraction of a second. 2. Forex trading can be done online and thereby, can be done from anywhere and anytime. 3. By the recently developed technology, you can use automated trading software for the Forex Trading which would make the transactions easier for you. 4. Unlike equity and bond trading, you can obtain considerable profits from the foreign exchange traded funds by using technical analysis of price charts. This means you do not need to delve into financial health like you do for trading bonds in order to secure impressive profits. 5. In case of equity trading, you need to keep a special tab on short-term and long-term trading activities for tax reporting. But in case of Forex, the tax rules are much simpler. Cons: 1. While Forex rates are influenced by multiple external factors like economics and socio-politics, their price determination process is a little complex affair. 2. For being available on high leverage, Forex trading is prone to a high risk. 3. With having no control over macro-economic and geopolitical developments, Forex trading is volatile in nature which again indicates that it is likely to have a higher risk.
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