What Is Currency Trading?

What Is Currency Trading?

Currency trading is speculative, pure and simple. The securities you are speculating on are the currencies of different countries. For this reason, currency trading revolves around the speculative dynamics of the market, or trading, and the factors that affect the value of currencies. Put them together and you will have the largest, most dynamic and exciting financial market in the world.
Often called the forex (or foreign exchange) market, the foreign exchange market is the crossroads of international capital, the intersection through which global trade and investment flows must move. International trade flows, such as when a Swiss electronics company buys Japanese-made components, were the original basis for the development of the forex markets.
The forex market is unique in many ways:
1. Since the volumes are huge, the liquidity is always there.
2. The forex market operates around the clock six days a week, giving traders access to the market any time they need to.

3. There are few restrictions on trading – no daily up or down trading limits, no restrictions on position sizes, and no requirements for shorting a currency pair.
4. There are anywhere from 15 to 20 different currency pairs – putting the US dollar (USD) against the currencies of other countries or putting two non-US dollar currencies against each other – depending on the type of forex broker you are dealing with.
5. Most individual traders trade currencies online through a brokerage firm. Online currency trading is usually done on a margin basis, which allows individual traders to trade larger amounts by taking advantage of the margin amount on the deposit.
Speculation revolves around financial risk in the hope of making a profit. But it’s not gambling (playing with money even when you know the odds are stacked against you) or investing (minimizing risk and maximizing return, usually over a long period of time). Speculation, or active trading, is about taking calculated financial risks in order to try to generate a profitable return, usually within a very short period of time.