FOREX: An Overview

Every country in the world has different colored and valued currencies. Interestingly, they are related to each other, which in turn opened gate for foreign trade and exchange. Irrespective of the differences, Trade, and commerce flourishes in every part of the world. Forex or Foreign Exchange market is the place where all the world currencies are traded. For example, if we are traveling from the US to a country in Europe, say, France, We need to convert dollars into euros for buying any service there. The exchange rate continuously varies depending on the buy and sell.

Attributes of Forex:

  1. It offers high liquidity, which is the flow of currencies, as the Foreign Exchange market operates round the clock accounting for the average exchange of 4$ trillion daily.
  2. It is transparent and more dynamic. As the transaction cost is also minimum, Forex is a perfect platform to trade.
  3. It has a minimum capital risk and leverage paves way for the high return.
  4. Even though it is a 24 hours market, there is no need for one to sit and watch all day. Depending on the currency we want to trade, we can operate in the specified time. For ex; if we are interested in trading Japanese currency, yen, the first hour of the Foreign exchange market is the ideal time for the purchase.
  5. The currency values are volatile with respect to each other. A deeper understanding of the trend is necessary to figure out the best time to trade and to obtain high returns.

Risks associated:

Forex Trading is not completely risk-free. We need to invest a little at the beginning for the leverage which is called margin. Fluctuations may result in a condition called margin call, where we will be pushed to invest more. Further fluctuations and volatility cause capital loss.

A currency’s exchange rate in the market is influenced by the change in the source country’s interest rate. Higher the country’s interest rate more is the currency strength in the foreign market and vice versa. This is highly risky that one may end up losing the principal amount.

Bottom line: Every trade and transaction is associated with possible risks. Thorough understanding and knowledge about the market and guidance from the brokers help to prevent the potential loss. Software like, the QProfit system helps the users to monitor the market in real time and provides technical support too. Rather than investing in one particular currency, wider investments guarantee higher profitability