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FOREX
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Currencies are the money of different countries and currency trading is
the exchange of buying and selling of these currencies. Forex (FOReign
EXchange) trading is one of the popular ways of trading in the currency
markets. The actual exchange rate between the two markets is done
through forex trading. The most popular forex market is the Euro to US
dollar exchange rate that trades the value of one Euro in US dollars.
Since forex markets are global markets, they trade round the clock.
Forex markets differ from day trading markets in that forex markets are
decentralized and are not provided by an exchange. The trades are
directly between two traders and there could be many different exchange
rates for the same currencies depending upon the location of the traders
and the brokers being used. The currencies are traded directly in a
forex market and the minimum amount that can be traded is known as a
lot, which is at least 25,000 dollars generally. This is a margin amount
and the individual traders need not be anywhere near the lot size in
trading their account since the forex broker would offer the lot size
instead. The forex markets have a very high liquidity, which is the
amount of money traded, and therefore they are able to absorb large
trades worth millions of dollars without the market being affected. If a
person has several million dollars to trade with and wants to convert
one currency to another indefinitely, forex trading is well suited. In a
forex trading, traders can place up to 100 lots at a time and can also
place stops, trailing stops or limits on open positions or have them
preset on market orders. Sometimes they are traded with zero commissions
and fees. Forex trading is not confined to one lot increment. Clients
are able to trade .5 of a lot.1.2 lot or any amount where each lot is
equal to 100000 currency units. It is possible for trading managers and
funds to trade multiple customer accounts from a single window and a
block order can be split up among multiple customer accounts as
specified by the trader. Also traders can open positions in the same
currency in the opposite directions without using any additional margin
or without the positions offsetting. If the margin is low, there is more
flexibility without getting a marginal call. The failure in online forex
trading can be attributed to various factors like: Over trading: the
trades should be considered well before trading because each faculty
trade may drain equity. Bad money management: the risk can be overcome
using stop loss orders since single bad trade may nullify the whole
year's patient smart trade. It is advisable not to risk a high
percentage on a single trade. Lack of knowledge: having a basic
knowledge and equipping oneself is imminent before plunging into forex
trading online. The knowledge and education of a trader play a vital
role between the success and failure in the forex market. Websites offer
a wide range of demo account, which can be practiced and utilized.
Online forex trading offers a great opportunity for profits but with a
high degree of risk. Therefore proper knowledge and guidance are
essential for a beginner to take on online forex trading.
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