Tuesday 30 August 2011

Know Foreign Exchange Trading

Foreign exchange trading, also known as Forex trading, is the where currencies of different countries are swapped with each other. Because of the technological advancement, traders need not to make physical exchange of fund. All what they have to do to perform foreign exchange trading is place an order using a PC with net connection. Multinational companies pay their overseas employees in their local currencies. So, they are counted as regular Forex trader. Many firms buy and sell products from overseas clients. All these transactions requires best Forex trading platform where they can trade with minimum charges. If company X of US has its employees in company Y of Europe then to pay them salaries company X has to buy Euro first. In the Forex terminology, this process of swapping Euro and Green bucks is written as “trading Green bucks for Euro”.

Apart from the business transaction, there is one separate category in Forex who perform foreign exchange trading to make profits from the currency rate fluctuations. In this category, there are commercial traders and others are retail traders. Once getting good command over the trading strategies, Forex becomes tremendously fascinating market for traders. Best forex trading platform shows you accurate and real time market data in form of graphs or charts. If you find that Euro is increasing in comparison to pound then you can trade EUR/GBP. Here trader buys Euro against sterling. If the second time trader notes fractional jump in Euro, he can sell them back and earn profit. The margin by which trader in Forex make profit is called “pips”.  Pips may very depending on the Forex broker you are trading with and trading software. Independent Forex firms are connected to the interbank network and purchase currencies in lots. Interbank rates vary based on the market conditions formed by global economical and political parameters. Forex at one time dominated by the banks has opened its doors for retail traders.

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