Online foreign exchange trading is an investment avenue whereby financial instruments are traded. It is the virtual demonstration of the activities that go on physically on the floor of a stock exchange that is replicated. The beauty of Online Foreign Exchange Trading is that it is done in the comfort of your home, with your computer system through the aid of internet connectivity.
It is essential to state that the foreign exchange market is actually the largest and most liquid of the financial trading market.
Of course, the high level of risk involved is incomparable with that of any other investment option. It is to this end that potential investors are advised not to invest their fund which they know they cannot conveniently do away with.
SOME TERMS TO NOTE IN FOREX TRADING
There are some commonly used terms in Online Foreign Exchange Trading which a potential investment must be familiar with. These terms are to help such an investor in having a clear understanding of the terrain.
This is defined as an individual, either corporate or personnel that provides a potential investor or currency traders with access to a trading platform. Brokers are usually known to handle a small portion of the trading market of the online foreign exchange trading.
• MARKET LIQUIDITY AND VOLATILITY:
In foreign exchange trading, it is important to know when the market is either liquid or volatile. The market is said to be liquidity when there are a large numbers of willing traders who want to buy or sell. At this time, the volume of trade completed on the platform is a function of the numbers of buyers and sellers available.
On the other hand, market volatility is a measure of the numbers of time that the price of currency changes over time.
• TRADING HOURS
Online foreign exchange trading takes place 24 hours. This simply means that there is no dedicated time, compared to what obtains on the floor of a stock exchange that has an open and closing time, and certain days in the week.
This is defined to mean the difference between the bid and offer price of a currency put up for trading on the platform. Essentially, spread in the online foreign exchange market is less or much tighter than as it occur on the floor of a stock exchange. This is due to various securities that are traded on the stock exchange.
There are potential profits to be made on the trading platform of an Online Foreign Exchange Trading business regardless of the direction that the trading may be heading. A short-sale means selling of a given currency prior to its pairing derivative before you buy it. Profit is made in the process only when the derivative is bought back for less than you received when it was sold.
A foreign exchange trader, who engages in short-sale, simply means that he can make a profit regardless of the market trend.