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What is Forex Trading?

Before taking a step further in understanding regard the Forex trading, it’s important to get know-how of understanding what is meant by Foreign Exchange Market. As the name suggests Forex market refers to as “A global market for exchange of currencies between two countries and it determines the two countries values against each other”. Thus one can understand in simpler terms that Foreign Exchange Market or Forex Signals involves cross border trade or trading standards globally within two countries. They are also a prime source for currency conversion and also trade between two or more countries. The evolutions of such markets are traced way long back from 1875 when gold standard monetary system was firstly introduced. There an ounce of gold was considered equal to amount of the currency of that country. Let’s now discuss an important aspect of Forex trading which are their benefits. This includes:

  • Globally transactions regard forex trading can be done at any point of time with advent of new technology even when at a go.
  • Leads generation of huge liquid reserves at cheapest available cost.
  • Leads to flexible trading as opened round the clock and for 5 and half days a week.
  • A highly lucrative profit margin as leverage enhancement is the main objective.
  • Inclusion of very few variables compared to other stocks or commodities trade.
  • Lesser competition as in case of other markets are being minimized and thus one can get huge profits and greater brand market can be established.

Forex is a great tool mainly used by Large banks, central banks, and other financial institutions, Governments, traders, brokers, institutional investors, global corporations, Travellers or Tourists etc as it involves cross border trade etc. The foreign exchange rates are determined by the factors which involve Economic, Political, Market Conditions prevailing etc. The most prolific currency widely used for Foreign Exchange market is as usual the American Dollar and Indian currency Rupee is amongst the top 15 currencies widely used globally. However though a very efficient, effective tool in making great revenues for  developing economies like India, one cannot just forget the disadvantages of Foreign Exchange Market or trading. Foreign Exchange Trade is a very risky affair as it depends largely on the market conditions, trading standards between countries, last but not the least if one has to invest money in Foreign Exchange trade, have to be knowledgeable regard trading moves as one bad move can lead to huge losses.

– Sub standard goods can lead to huge loss for a country, but for another economy it’s a gain. For Ex: Chinese goods are flooded in world market which is available at much cheaper cost. Off late traders have understood this and thereby these goods are not allowed for trade.

– High Excise duty, taxes etc makes the Foreign exchange trade to be costly affair as well. Though now governments have reduced these and thus cross-border, countries have now being made flexible.

However in the era marked by recession most of the financial advisors/bodies, banks etc rely on Forex trade to minimise after effects of the issues caused due to this dual problems.

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