Trading in any investment market is very difficult, as evidenced by the fact that most beginning traders lose money. However, success can be found ꦬwith enough of the right education, practice, and experience. So, what is currency trading and is it right for you?

The currency market, or forex (FX), is the largest investment market in the world and continues to grow annually, with more than $7.5 trillion in notional value exchanged daily, as of April 2022. By comparison, daily value traded on the 澳洲幸运5官方开奖结果体彩网:New York Stock Exchange (NYSE) averaged ~$117 billion in the first half of 2024. Traditionally, the bulk of the volume came from professional traders, but as 澳洲幸运5官方开奖结果体彩网:currency trading platforms have improved, more 澳洲幸运5官方开奖结果体彩网:retail traders have found forex to be suitable for their investment goals.

How Does Currency Trading Work?

The forex market runs 24 hours a day, five days a week, from Sunday, 5 p.m. until Friday, 4 p.m. ET, but different times of the day may🧸 have entirely different trading dynamics. Traders generally recognize three sessions: Asian, European, and the U.S. Although there is some overlap in the sessions, the main currencies in each market are traded most heavily during their respective market hours.

This means that certain currency pairs will have more volume during certain sessions. For example, traders who use pairs based on the dollar will find the most volume during the U.S. 澳洲幸运5官方开奖结果体彩网:trading session.

Pairs and Pips

All currency trading is done in pairs. Unlike the 澳洲幸运5官方开奖结果体彩网:stock market, where you can buy or sell a single stock, in the forex market you buy one currency and simultaneously sell another. Each currency pair is quoted in terms of one currency versus another. For example, in the EUR/USD currency pair, EUR (the euro) is 澳洲幸运5官方开奖结果体彩网:the base currency and USD (the U.S. dollar) is the 澳洲幸运5官方开奖结果体彩网:quote currency. If you buy this pair, you are buying euros and selling dollars. Conversely, if you sell 🎉this pair, you are selling euros and buying dollars.

Nearly all currencies are priced out to the fourth decimal point. A pip (percentage in point) is the smallest increment of trade. One pip typica꧋lly equals 1/100 of 1%, or the number in the fourth decimal place . Most currencies are priced out to the fourth or fifth decimal place(the EUR/USD pair might be quoted as 1.1234).

Exceptions to this rule are currency pairs that include the 澳洲幸运5官方开奖结果体彩网:Japanese Yen (JPY) as the quote currency. These pairs typica🦩lly price out to two or three decimal places, with a pip being represented by the second decimal place (the USD/JPY pair might be quoted as 156.7♕8)

Currencies are traded in various sized lots. A is 1,000 units of the base currency in a pair. If your account is in U.S. dollars, a micro lot represents $1,000 of your 澳洲幸运5官方开奖结果体彩网:base currency, the dollar. A mini lot is 10,000 units of your base currency and a 澳洲幸运5官方开奖结果体彩网:standard lot is 100,000 units.

Retail or beginning traders often trade currency in micro lots, because one pip in a micro lot represents only a 10-cent move in the price. This makes losses easier to manage if a trade doesn't produce the intended results. In a mini lot, one pip equals $1 and that same one pip in a standard lot equals $10. Some currencies move as much as 100 pips or more in a single trading session making the 澳洲幸运5官方开奖结果体彩网:potential losses to the small investor much more maꦺnageable by trading in micrᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚo or mini lots.

Far Fewer Products

The majority of the volume in currency trading is confined to only 18 currency pairs compared to the thousands of stocks that are available in the global 澳洲幸运5官方开奖结果体彩网:equity markets. Although there are other traded pairs outside of the 18, the eight 澳洲幸运5官方开奖结果体彩网:major currencies most often traded are the U.S. dollar (USD), Canadian dollar (CAD), euro (EUR), British pound (GBP), Swiss franc (CHF), New Zealand dollar (NZD), Australian dollar (AUD) and the Japanese yen (JPY). Although nobody would say that currency trading is easy, having far fewer trading options makes trade and 澳洲幸运5官方开奖结果体彩网:portfolio management more simple.

The Bottom Line

Much like anything in investing, learning about currency trading is easy, but finding the winning 澳洲幸运5官方开奖结果体彩网:trading strategies takes a lot of practice. Most 澳洲幸运5官方开奖结果体彩网:forex brokers will let you open a free virtual account to trade with virtual money until you find strategies that will help you become a 澳洲幸运5官方开奖结果体彩网:successful forex trader.

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