The fluid nature of exchange rates serves as the backdrop for forex traders seeking to capitalize on these fluctuations. Let’s illustrate this with an example: Imagine you embark on a journey abroad and convert $500 into euros. After a week, you return, having not spent a single euro, and swap your euros back into dollars. To your delight, you receive $505 due to the shift in exchange rates over the week. This amounts to a $5 profit, a gain achieved through the art of currency trading.
Contemporary advancements have revolutionized forex investment, negating the need to venture beyond your abode or even physically own the currencies. Online forex trading enables anyone to engage in currency price speculation from the comfort of their home or even via their smartphone, seizing opportunities brought forth by price variations.
- Majors
- Cross pairs
- Exotics
Pip, an acronym for ‘Percentage in Point,’ symbolizes the smallest price movement in most currency pairs. It generally corresponds to the fourth decimal digit’s shift in rate, except for Japanese Yen pairs, where it aligns with the second decimal digit’s movement. To simplify, if the EUR/USD shifts from 1.1050 to 1.1051, this increment of 0.0001 in value represents one Pip.
Operating ceaselessly, the forex market unfolds across four distinct sessions: Sydney, Tokyo, London, and New York sessions. These segments ensure 24-hour market availability, catering to traders across the globe.
Formerly the domain of deep-pocketed investors, currency trading now extends its reach to anyone through Contracts for Difference (CFDs). This mechanism offers a unique tool known as ‘leverage,’ permitting substantial trades with a modest investment. A mere €100 outlay can enable a trade of up to €40,000, leveraging at 400:1, exemplifying the democratisation of currency trading.