Breaking Down Currency Trades

Forex stands for foreign exchange, but I’m not talking about students here. 

Instead, I want to help you learn how to take advantage of forex trading just like you would when trading stocks.

In fact, forex works a lot like the stock market. The only difference on the surface is that you’re trading currencies instead of shares.

Another difference lies in volume. On most days, trading volume exceeds $5 trillion. It’s a highly liquid investment pool, which appeals to many investors.

But what is forex trading? And how can you take advantage of opportunities in the market?

You might know that I’m partial to penny stocks, but I’ve also researched many other types of investment vehicles. Each has its own unique set of rules, expectations, and risk levels, so I urge you to learn about them all.

Today, I’ll cover what you need to know about forex trading.

What is Forex Trading?

Forex trading, often abbreviated FX, is a global marketplace in which each of the world’s currencies can be traded based on their buying and selling price.

The spread — the difference between the buying and selling prices — can be infinitesimal because of the micro changes in currency prices.

If you’ve ever traveled internationally, you understand currency exchange. For instance, when you travel from the United States to Japan, you exchange your U.S. dollars for Japanese yen. Currently, $1 is equal to 109.87 yen.

Currencies on the forex market are traded in pairs. You’ll see the abbreviation for the currency you’re buying next to the abbreviation for the currency you’re selling.

Let’s say, for instance, that you’re trading the euro for the Canadian dollar. The pair would look like this: EUR/CAD. EUR stands for the euro and CAD stands for the Canadian dollar.

Since forex trading is a highly liquid investment opportunity, trades can happen in fractions of a second. In other cases, buyers hang on to their investments while they wait for a positive swing based on their position.

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