Fascinating Facts of Currency Trading

Fascinating Facts of Currency Trading

In the normal sense, ‘Trading’ implies purchase and sale of goods at a specified place called the market. For example, shares are sold and bought in a stock market; commodities are bought and sold in a commodity market. Interestingly, for trading in currencies there is no market place at all. Even in the absence of a ‘Market’, the volume of trading in currencies exceeds 2.5 trillion dollars in a single day!

With improvement in communication, trading between countries has increased enormously. This has necessitated exchange of currencies between the countries to ensure smooth trading. It is here, the importance of currency trading which plays paramount role in international trade and commerce.

Understandably, currency market is highly sensitive and therefore it is highly volatile. That is why it is also called as ‘liquid market’. This is because the stability of the currency market depends on the performance of each of the countries in their respective economic front.

Although such a huge volume of transaction takes place in a currency market, there are no government regulations to oversee the transactions. Even then, the currency trading has been going on without any hitch.

How currency markets operate?

In a currency market, exchange of currencies does not take place at all. All transactions are carried out through a dealer. The dealer does not charge any commission to the investor. The profit of the dealer is the difference between ‘Bid’ (selling rate) and ‘Ask’ (buying rate). The difference between these two is also called as ‘Spread’. Currency trading is always done in currency pair; because currency of one country is paired off against the currency of the other country.

With the invention of internet, the currency trading has increased to a very large extent. Earlier, currency trading was restricted to few business houses or banks. Now, even a small investor can enter the market. For this purpose all that he needs is a computer with internet connection. With a shrewd approach, the trader will be able to make huge profit.

The market is open 24/7 and therefore trading can be done at any time convenient to the investor. Rates quoted in a currency market are to the fourth decimal. A change in the rates in the fourth decimal is called as ‘pip’.

The investor on his part should approach an experienced and reputed dealer. Such Commodity Trading dealers will properly guide the investor and this will ensure the safety of the investment and the investment will earn suitable returns.