Things to know about currency trading for better understanding

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Currency trading is all about buying and selling currencies at applicable exchange rate in the foreign exchange market. Like all other trading the main motive and intention of currency trading is making money. Forexis the largest currency market and deals with nearly $2 trillion of world currencies daily.

It operates 24 hours for 5 days in a week and trading can be done online from any convenient place. Unlike other stock market that deals with huge number of stocks for trading, currency trading markets only have few currency options making the trading process simple, clear and understandable. And most importantly to get started you do not need huge investment thus making it accessible for everyone.



Exchange rate and currency trading

Exchange rate is the determining factor in trgovanjevalutama, and it keeps on fluctuating. Exchange rates are quoted in pairs as base currency and counter currency. For most of the countries exchange rates are expression to four places after decimals few exceptionslike Japan is there, where it is expressed in two places after decimal. Exchange rates are often influenced by any prominent political and economical events so before buying or selling currency it is always better to be informed about such events which might affect your capital. Two major types of exchange rates are spot rates and forward rates

· Spot rate:It is the current rate for that particular currency pair and the price will be quoted at the spot depending on the amount the buyer is ready to sell and the amount at which seller is ready to accept. It is also commonly known as benchmark rate, outright rate or straight forward rate. As the current market value and expected market values of currencies keeps on changing so does the spot rate.

· Forward rate:it is used to determine the future market value of the currency and will be applicable only to future deals. Forward rates are determined based on spot rate and adjusted for interest rate differential s. It is mostly used for hedging purpose in currency market.

Role of broker in currency trading


For trading currencies you must have a trading account just like your bank account. The broker provides you the account and the trading platform such as trading software and web browser for your access in the financial market. In simple words broker acts as a middleman between trader and the market. They not only help find prospective buyer or seller but also act as a media between liquidity provider and trader. So before choosing a broker few considerations have to be made for gaining maximum benefits and avoiding any disaster. Some qualities of a competent broker are:

• Reliable: As you are dealing with money so before picking any broker first check whether they are registered with any of the regulatory bodies in your country. Each country has their own regulatory bodies and names of the credential broker will be listed there.

· Affordable charges: Choose a broker with low transaction charges. As in every single transaction you have to pay either spread or commissions to the broker, so the lower the fees, the higher your profit margin.

· Convenient withdraw procedure: You should be able to withdraw any profits you make immediately without any hassle. So look for a broker who does not hold your profit unnecessarily because the broker only holds your money as per your wish for smooth trading purpose.

· Simple and user friendly trading platform: As online trading depends on the effectiveness of the trading platform. So check the feasibility of the software or web browser and look for all the analyzing tools and techniques like charts and other relevant information which will help you to take decision after evaluating the market.

Make yourself well informed with the common terms for trading like pip, spread, ask rate, bid rate, currency rate etc.

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