This post will provide an introduction to forex opportunities, give insight into why forex markets can be profitable, and will help readers gain the basics of forex trading.
Forex trading was not available to retail investors originally when online spread betting first started in the 1960’s. Only banks and life insurance companies had the resources. As spread betting companies developed their operations they began to offer online forex trading. The growth of spread betting and online gambling has made is simple for retail investors to take part. Many spread betting companies now operate in the forex market. Such competition has led to companies offering user friendly trading platforms with simple order systems, charts, and technical support. It is worth shopping around. A spread betting company that allows you to stake small amounts is a good starting place. Forex markets are priced to four decimal places. This means a very small move can result in very big wins or loses. To start your journey into forex markets it’s advisable to start with small stakes.
It’s simple really: you can spread bet a currency pair to either increase of decrease with one increasing in value against the other. Fixed odds bets on forex markets are also available. Website’s like betonmarkets.com offer you fixed odds bets on various markets. For example, you can bet a currency pair will not hit a level defined by you or that it will trade within a range set by you. Find out more about bet on markets here.
So why trade forex markets? Traders in any markets tend to determine the trend of the market. Traders in the forex markets have very large trading accounts and are led more by price action. This tends to cause self forfilling trends, for example, the more a currency moves in one direction the more the traders will push it in that direction. This can also be known as momentum trading. The fundamental drivers of currency markets, for example interest rates, inflation, balance of trade and a countries current account deficit or surplus can be active for years. Forex markets do not move in connection with equity markets or bonds. Trading currencies is an excellent way of creating a diversified global trading portfolio. Diversification is important because if equity markets loose value you have a chance to gain from forex markets.
The most frequently traded currency in the forex markets are the dollar and 6 others. The droller’s forex symbol is USD. You can also choose from the euro, EUR; the Japanese Yen, JPY; the British pound, GBP; the Swiss Frank, CHF; the Canadian dollar, CAD; and the Australian dollar, AUD. Each currency even has it’s own nick name, for example, the dollar is called the greenback, the British pound – aka cable, the Swiss franc is called the Swissie, and the Canadian dollar is called the loonie.
The worlds central bank hold the largest proportion of their reserves in dollar denominated assets….making the US dollar the worlds reserve currency. This means he dollar has a pivotal roll in many markets. The oil market is priced in dollars as are most commodity markets. If you want to import goods form Asia you can bet they’ll be priced in dollars. This means countries must hold dollars in order to purchase goods, trade in goods, or trade in raw materials. You will find that most spread betting companies will quote in terms of dollars. Always bear in mind which way the currency is being quoted, as it’s direction will represent either an appreciation or depreciation against the dollar. For example, a rise in the value of JPY/USD – expect to see the line of a forex chart moving upwards – means the Yen has gained in value against the Dollar. A rise is value of USD/JPY means the Dollar has gained in value against the Yen – again the line on a forex chart would be moving up.