Trading Forex has seen its popularity increase dramatically over the past 10 years. One question that comes up quite often is what is Trading Forex? Forex is short for the foreign exchange market. This is where variety of currency crosses are transacted. The values of the these currencies are constantly changing. These transactions take place in what is known as the interbank market. The interbank market is composed of all of the major banks that are constantly trading various currencies. Recently trading Forex has been brought down from a bank level to the retail level. No individual traders have the ability to trade the Forex market. There are many reasons that trading Forex has become so popular among retail traders. Currently the Forex market has a turnover rate in excess of $5 trillion.
Retail traders tend to trade the better-known of the Forex currency pairs which are also known as the “majors”. These pairs would include the EURUSD, the USDJPY, the USDGBP, and the USDCHF. These are the pairs that offer the most trading activity as well as the most liquidity. Some exotic currency pairs have entered into the market for retail traders as well. Trading on the Chinese R&B and also the Indian Rupee have grown in popularity among retail Forex traders. Some of the countries where retail Forex trading is popular would include the United States, Japan, Singapore, Switzerland, Hong Kong, and Australia.
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Trading Forex and Derivatives carries a high level of risk, including the risk of losing substantially more than your initial investment. Also, you do not own or have any rights to the underlying assets. The effect of leverage is that both gains and losses are magnified. You should only trade if you can afford to carry these risks. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary.
