The forex market is a non-stop cash market where foreign currencies of countries are traded typically through brokers. Since foreign currencies are bought and sold constantly across local and global markets, the investment opportunities abound in great measures.
Private investors can trade in forex directly or indirectly using the spot market, forwards and futures, options, contracts for difference and spread betting. Most investors are attracted to short-term forex trading for many reasons, they include:
1. A 24-hour trading, 5 days a week with access to global forex dealers
2. An enormous liquid market making it easy to trade most foreign currencies
3. Many volatile markets offering profit opportunities
4. Standard instruments used to control risk exposure
5. The ability to make profit in rising or falling markets
6. Leveraged trading with low margin requirements
7. Many options for zero commission trading
As stated in a typical forex guide, trade only when you expect the currency you are buying to relatively increase in value compared to the one you are selling. If there is no increase in value of purchased currency, then efforts must be made to sell back to the original currency to make a profit.
Since the forex market is very speculative, meaning that the person or institution that bought or sold the currency has no plan to actually take delivery of the currency but was just solely speculating on the movement of that particular currency.
Although forex trading generates very profitable results, the risks involved are enormous. From country risks to exchange rate risks to interest rate risks and credit risks; approximately 80% of all currency transactions only last for a 7-day week period or less while more than 40% last for less than 2 days. The very short lifespan of a typical trade makes the risks enormous and creates the need of technical indicators and other forex guide very necessary.
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