What is retail foreign exchange trading?
Retail foreign exchange trading is a segment of the foreign exchange market where investors aim to profit from exchange rates between different currencies.It’s also known as 'Retail Forex Trading', and currencies can be bought and sold in seconds.
Since the introduction of online trading, anyone can enter the global marketplace through an online broker and access the same trades as banks and large financial institutions.
Where have you heard about retail foreign exchange trading?
Retail foreign exchange trading hit the news in 2015 when the Swiss National Bank (SNB) removed its €1.200 cap on the Euro without warning.
The value of the Swiss Franc rose 30% causing volatility in the market and huge losses for investors, brokers and banks <https://www.cnbc.com/2015/01/15/whats-behind-the-swiss-francs-surge-pro.html>.
What you need to know about retail foreign exchange trading.
Investors can use a broker’s website to make a trade; betting on the short term direction of exchange rates or currency pairs.
Speculating on the foreign exchange market is attractive to investors as it operates 24 hours a day and isn’t typically impacted by recession
Foreign exchange risk could cause financial loss if foreign exchange rates change unexpectedly. Investors can hedge their risk using what’s known as an 'automatic stop loss' order, which is an advanced trade order that establishes a predetermined price limit that can’t be exceeded during the trade.
How do foreign exchange markets work?
The foreign exchange market works through financial institutions and operates on several levels. Behind the scenes, banks turn to a smaller number of financial firms known as "dealers", who are involved in large quantities of foreign exchange trading. Most foreign exchange dealers are banks, so this behind-the-scenes market is sometimes called the "interbank market" (although a few insurance companies and other kinds of financial firms are involved). Trades between foreign exchange dealers can be very large, involving hundreds of millions of dollars. Because of the sovereignty issue when involving two currencies, Forex has little (if any) supervisory entity regulating its actions.
How do foreign exchange traders make money?
Foreign exchange trading attempts to make a profit by predicting the value of one currency compared to another.
FX trading is normally conducted through 'margin trading'. A small collateral deposit worth a percentage of a total trade's value is required to trade.
Trading in international currencies requires a huge amount of knowledge, research and monitoring. Before you put your money on the line, get independent advice from a licensed financial adviser.
You May Like: