So a trader might be asking themselves, what can I trade? The answer is: A lot. From forex to futures to stocks to commodities, there are a lot of opportunities in the markets to make money. And with forex, you can be online all the time with the chance to make a profit.
Trading in the financial markets is an excellent way to start a new career or even being a side gig that allows you to make some real money. And one of the largest markets in the world is forex or foreign exchange. Because so many countries have currencies and their business hours are spread out across time zones, you can do forex trading 24 hours a day if you want. Obviously, no single trader stays up for 24 hours to do forex trading, but they do run 24 hours a day. And there are trading operations that run 24 hours a day.
One of the best aspects of the forex market for traders and investors is the liquidity. Because the market is 24 hours and global, there is almost always someone on hand to buy something. So when you take a position on a currency, you can usually liquidate that position in a timely manner. That may not always happen in other markets where the ownership of an asset could be a burden.
The average daily turnover in the forex market is always growing. Lots of governments, market makers, banks, non-governmental agencies and other entities are constantly involved in the foreign exchange market. The need to exchange currencies to allow business to be conducted across borders is always there. So different people need access to different currencies at all times of day and night.
The forex market works a little differently from other markets. Currencies are traded against one another in pairs. Each pair actually makes up the trading product that a trader or investor buys and sells. The base currency, or first one in the pair, is quoted relative to the second currency, or the quote currency. You will probably see the XXX/YYY designation once you start to get into forex trading.
One easy example is looking at the euro and the dollar. If the EUR/USD is 1.487, that means that one euro is equal to 1.49 dollars at the current exchange rate. Most of the time, the market defaults to quoting the USD as the base currency.
The forex market is not government by a single exchange or any sort of global body. It is really a network of many smaller OTC, or over-the-counter, exchanges. That gives the opportunity for larger market participants to revel in arbitrage. Arbitrage is the buying of a security or instrument in one market and then selling it for a higher price in another market, in an attempt to make a profit off the temporary difference in price.
One of the keys to being successful in forex trading is the ability to manage your risk. There is no profit in wild and wanton behavior in the trading market. You want to be able to go into each and every trade with a solid plan for what you think is going to happen. And you need to be able to extricate yourself from a bad trade, before it pulls down your bottom line. That may be slightly easier in forex, because it is such a large and liquid market, but you need to be careful nonetheless.