Forex stands for foreign exchange trading currency. It is also called as FX. It is one of the fast-paced and most exciting markets around the world. It is a global market with an immense daily trading volume and astounding liquidity. Forex trading in the current market had been the prominent domain for large financial institutions, central banks, Multinational corporations, extremely wealthy personalities, hedge funds,etc., And it is possible for any new trader to buy and sell currencies easily through an online brokerage account. Forex market renders plenty of opportunities for the investors. If the user wants to be successful in Forex Trading, then the user has to learn and understand the basics of currency movements as per the current market conditions.

Benefits of Forex Trading:

24 hours market:

Forex market is worldwide, so trading happens continuously as long as the market is open somewhere in the world.

High Liquidity:

It is nothing but the ability to convert into money quickly without much commission and hidden charges. Which will helps the users to move a large amount of money to any foreign currency.

Lowest Transaction cost:

The cost of per transaction is configured as the price in Forex, It is called as “Spread”. Spread is nothing but the difference between the selling and buying price.

Leverage usage:

Leverage is the ability to invest something small to control something big in Forex Trading. Forex brokers permit investors to trade the market using Leverage. For Example: If the user wants to trade at 40:1 Leverage, the user can trade for $40,000 using $1,000 of the capital on their account.

Profit potential from raising/falling prices:

Forex allows directional trading based on the currency pair, if the value is going to increase, the user can buy it and go long and if the value is going to drop, the user can do vice-versa.

Risks involved in Forex trading:

Due to the very high trading volume, Forex trading involves highly liquid assets, hence there is plenty of risks involved that can result in significant losses. Below are the different types of risk user has to encounter in Forex trading:

Leverage Risks:

Leverage needs small investment called as Margin to gain access to foreign trades. Price changes may result in margin calls and the user has to pay an additional margin, may result in a considerable loss in the initial investment.

Interest Rate Risks:

Strong currency stipulates High returns for the user. If the country’s interest rate increases, the currency will strengthen and provides higher returns and vice-versa. Hence the difference between the currency values drives forex prices to change dramatically.

Transaction Risks:

These Risks are based on the time difference of the contract duration on the exchange. If the time difference beginning of the contract and the end increases, then the transaction risks also increase.

Counterparty Risks:

It is the financial transaction taken care of the company, which provides asset or profits to the investor. Due to the fluctuating market situations, the company may refuse to pay, can result in a huge loss to the customer.