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Currency for trading – how to make a choice?
There are more than 170 currencies in the world, which raises the logical question: which currency is better to choose for trading? Let us try to deal with this issue together.
For currency speculation in the Forex market, will not fit all. So let’s consider the five major currencies with the highest liquidity and no problems with their purchase/sale.
United States Dollar (USD) is an international currency, managed to replace gold and cemented a major role in global trade and investment after world war II. Quite often, the us Dollar acts as a secondary legitimate means of payment, playing the role of a secondary currency. It is a reserve currency, making oil, gold and 80% of securities sold for dollars. In addition to all the fact that in the global financial system the exchange of different currencies occurs through the dollar.
Euro (EUR) is a young and promising European currency that saw the world in 1999 and became the national currency for the 19 countries of the European Union. At the moment, this currency continues to maintain the position of the second currency of the world, since it is in this currency that about 40% of world trade transactions are carried out. The Euro is also a reliable currency, as about 1/4 of all foreign reserves are held in euros.
Pound Sterling (GBP) is one of the most expensive currencies in the world. It serves as a reserve currency and is ranked third in the world by its provision. It differs in stability of growth of the rate in relation to other currencies. As a result, currency pairs with the GBP are of particular interest to Forex traders.
Swiss Franc (CHF) is a currency with the status of “safe heaven” from the most reliable Bank in the world. It is little involved in the system of international settlements, but is among the most stable currencies in the world. Together with other currencies from our five, it is unofficially recognized as the world’s key reserve currency.
Japanese Yen (JPY) is the national currency of Japan and one of the most popular currencies in Asia. It has high liquidity and a rather unstable rate. Although frequently can be adjusted from the state of the Issuer, it takes a well-deserved place in some other currency, exposed foreign exchange reserves of the Central Banks of many countries. Its share in foreign exchange reserves equal to at least 4%. The yen is one of the cheapest freely convertible currencies.
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The Basics Of Currency Trading
The investment markets can quickly take the money of investors who believe that trading is easy. Trading in any investment market is exceedingly difficult, but success first comes with education and practice. So, what is currency trading and is it right for you?
The currency market, or forex (FX), is the largest investment market in the world and continues to grow annually. On April 2020, the forex market reached $4 trillion in daily average turnover, an increase of 20 percent since 2007.
In comparison, there is only $25 billion of daily volume on the New York Stock Exchange (NYSE). The market may be large, but until recently the volume came from professional traders, but as currency trading platforms have improved more retail traders have found forex to be suitable for their investment goals.
- Forex exchanges allow for 24-7 trading in currency pairs, making it the world’s largest and most liquid asset market.
- While it is the largest market in the world, a relatively small number (
20) of currency pairs are responsible for the majority of volume and activity.
How Does it Work?
Currency trading is a 24-hour market that is only closed from Friday evening to Sunday evening, but the 24-hour trading sessions are misleading. There are three sessions that include the European, Asian and United States trading sessions.
Although there is some overlap in the sessions, the main currencies in each market are traded mostly during those market hours. This means that certain currency pairs will have more volume during certain sessions. Traders who stay with pairs based on the dollar will find the most volume in the U.S. trading session.
Currency is traded in various sized lots. The micro-lot is 1,000 units of a currency. If your account is funded in U.S. dollars, a micro lot represents $1,000 of your base currency, the dollar. A mini lot is 10,000 units of your base currency and a standard lot is 100,000 units.
Top 5 Questions About Currency Trading Answered
Pairs and Pips
All currency trading is done in pairs. Unlike the stock market, where you can buy or sell a single stock, you have to buy one currency and sell another currency in the forex market. Next, nearly all currencies are priced out to the fourth decimal point. A pip or percentage in point is the smallest increment of trade. One pip typically equals 1/100 of 1 percent.
Retail or beginning traders often trade currency in micro lots, because one pip in a micro lot represents only a 10-cent move in the price. This makes losses easier to manage if a trade doesn’t produce the intended results. In a mini lot, one pip equals $1 and that same one pip in a standard lot equals $10. Some currencies move as much as 100 pips or more in a single trading session making the potential losses to the small investor much more manageable by trading in micro or mini lots.
Far Fewer Products
The majority of the volume in currency trading is confined to only 18 currency pairs compared to the thousands of stocks that are available in the global equity markets. Although there are other traded pairs outside of the 18, the eight currencies most often traded are the U.S. dollar (USD), Canadian dollar (CAD), euro (EUR), British pound (GBP), Swiss franc (CHF), New Zealand dollar (NZD), Australian dollar (AUD) and the Japanese yen (JPY). Although nobody would say that currency trading is easy, having far fewer trading options makes trade and portfolio management an easier task.
What Moves Currencies?
An increasing amount of stock traders are taking interest in the currency markets because many of the forces that move the stock market also move the currency market. One of the largest is supply and demand. When the world needs more dollars, the value of the dollar increases and when there are too many circulating, the price drops.
Other factors like interest rates, new economic data from the largest countries and geopolitical tensions, are just a few of the events that may affect currency prices.
The Bottom Line
Much like anything in the investing market, learning about currency trading is easy but finding the winning trading strategies takes a lot of practice. Most forex brokers will allow you to open a free virtual account that allows you to trade with virtual money until you find strategies that will help you become a successful forex trader.
10 Ways to Make Money via the Currency Market
You think trading currencies is the only way you can make money from the global currency market, right?
Well! There are several other ways you can make money through this super huge market.
The currency market is a very lucrative destination. With a daily turnover close to $4 trillion, there is a huge amount of liquidity floating around and is merely a matter of time before you get to grab a piece of this pie.
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But are you wondering what exactly could be your career options in the currency market? In case you are wondering if it is only limited to being currency trader, let me clarify to you at the very behest that this is not the case. Yes, of course, currency trading is a major impetus, but if you are not game for it, the huge range of options available otherwise too is quite extensive.
1. Trade Currencies Online
Of course, first and foremost, this is one of the most direct and straightforward ways to make money from the currency market. If you learn the basics of currency trading, you can start your individual trading initiative sitting at home. Trading currencies online is neither cash intensive nor does it require huge manpower and office. A laptop, internet connection, a demat account and basic understanding of the currency market is all you need to get going.
currency trading can well be your full time job helping you match salaries of any other high paying career of your choice. Let me use the analogy of driving a car, before you learn to drive you are scared that you will hurt someone, ram the car into something. Yet when you learn to drive, it is a pretty much cakewalk and actually an enjoyable experience albeit with some care.
Another interesting advantage is this is perhaps one of the very few ventures that enable you to make a lot of money with a very small initial capital, provided you get it right. Even if the trade does turn unfavorable what you lose is quite small comparatively hence the extent of loss is never so huge that you won’t be able to recover. This is unlike stock markets where you need a huge initial investment.
2. Open Brokerage Firm
Well, once you get going with currency trade, the next logical step is opening a brokerage firm, becoming a facilitator for many others interested in currency trade. Opening a brokerage firm is like any business. You need to persevere to excel and make your mark and provide a service that will make you stand out in the group.
Also opening a brokerage gives you the opportunity to preserve your profits better as you get a percentage as service charges for every trade that is executed using your brokerage firm. That means however the trade turns out you can always get a certain amount of money as being facilitator of the transaction. Therefore, this can be a steady source of information for you irrespective of the way trade pans out. With the onset of online trading more and more people are getting interested.
Unlike trading currencies online, opening a brokerage firm needs more money. Additionally, you can sit at your computer and trade currencies on your own, but running a brokerage is not something you can do alone. You need to have a team. You need technicians who manage and promote your site, take care of the clients who sign up for an account online and through your website, some others have to support your clients and take care of their withdrawals, funding, nagging, and… .
You also have to pay for the platforms monthly fees, servers, bridge services to the liquidity providers and… .
As you see it is not as easy as you might think. It can be hard and complicated. It can make money, cover the expenses and leave some profit for you only if you succeed to have a reasonable number of clients who trade actively, otherwise it will be too hard to maintain and promote.
In spite of all of these problems, some people are brave enough to go for it, and many of them make a lot of money. Some others get tired of the headaches after a while of running and promoting this business, and so they get rid of it. They either sell or close it.
What I am trying to say is that if you are thinking about running a currency brokerage firm, you have to get prepared for it and make sure that you can handle it and take care of the expenses it has as long as it has not become profitable, otherwise you will be in trouble.
3. Open A Website On currency Trading
In today’s world where everything is easily available on the Internet, knowledge as a commodity too is high on demand. You can use your knowledge in currency trading to the maximum by using this unique method to spread it amongst others, albeit for a cost. You can design a website that allows people to understand the basic of currency trade, familiarize them with the various terminologies used and also guides them with knowhow about how to start trade.
To make it a revenue generating module, you need to strive to make the site interesting and informative to ensure that readers or visitors to your suite who are interested to trade in currency, feel compelled to subscribe to your services and benefit from it. Not only can you offer annual, 5-yearly subscriptions and the like you can also think about selling services in part. May be you can explain the readers the basics of opening an account for currency trade and charge them for helping open one.
Similarly you can also offer services in terms of cresting a separate niche for those attempting to navigate technical aspects of currency trade or perhaps need assistance in deciding the exact leverage they can choose to risk without a major hassle or exposing themselves to any improper risk.
Your website can be the gateway to personalize all this services separately or as a package for the willing clients in a way that they get the maximum for the money invested. This kind of value added service will also spread word about your credentials and will work towards attracting more willing clients interested in investing, but not confident about the currency market dynamics and how to deal with them.
However, in order to make money for such a website, first you have to know what currency trading is and you have to be a good currency trader yourself, otherwise people cannot trust your products and services. For example, if you sell a currency signal service on your site, your signals have to be profitable, otherwise your clients will not keep on paying for it and will ask for a refund. I see so many sites selling signals, but people are not happy with them. The reason is that they are not launched by for real traders, and so their signals don’t make money for traders.
Now the question is whether a good currency trader bothers to run a site and make money through it while he can easily make money through currency trading without any headache?
This is the question those who want to sign up for your service will ask. And it is a good question. There is nothing wrong with making money through different resources like your currency trading website, as well as currency trading itself. However, it is the matter of trust.
People have to believe that you are a good currency trader who wants to share his knowledge with them. It is your right to charge a fee for the services you offer, even if you are a good profitable currency trader. You spend time on your site and services your offer, and people have to pay for it, no matter if you are multimillionaire. But, as I mentioned, you really have to be a good currency trader, and you have to be able to attract people trust through offering a service, be it signals, robots, and…, that works and makes money.
There are too many trading related sites over the Internet, and many of them have invaluable information. However, you can hardly find a paid service that keeps on performing properly in long term. The main reason is that they are not launched by professional and profitable traders.
You can be a good programmer and develop a robot. I have heard that some of the sites that sell robots have made millions. But I have never heard that their robots make money for traders in long term. If they have been able to make a lot of sales, it is because they are good internet marketers and also spend a lot of money on promoting and advertising.
There is nothing wrong with being a good currency trader and internet marketer at the same time. But your robot or service that people pay money for, has to work properly and make money for them, otherwise making money through such robots and services is NOT legitimate and legal.
4. Become A Technical/Fundamental Analyst On currency
The currency market trends can be analyzed in two principal ways, the fundamental factors and the technical aspect of it all. Most brokerages employ separate set of researchers for analyzing the technical aspects separately and some who limit themselves to studying the fundamental aspects of it.
The fundamental aspect holds significance from the perspective that this gives a currency trader the broad and basic signals. For example, how will the US dollar-Euro trade if the US Fed suddenly raised rates or the effect of the plunging crude oil prices on the currency movement? The fundamental signals gives a trader the broad perspective on the general trend that is set to follow and it is the fundamental analysts across brokerages who are working tireless to create the best case scenarios for traders and keeps them prepared for any eventuality.
On the contrary, if market technical interest you, you could even choose to become a technical analyst whose job is to interpret trends and create an awareness of the pattern of trade that is being followed by currencies. The myriad range of technical trends, their graphical representation and how to interpret them needs complex money market understanding and is much in demand as a separate service and a career option for you to pursue.
5. Currency Researcher
This one is connected with the previous one, but there is a difference. While fundamental or technical analysts can choose to work independently or at a brokerage, a currency researcher or a currency strategist can work as an all in one package and essentially on independent terms.
However, to be a currency strategist or researcher you need to have a financial academic background and in most countries you need to be a ‘Certified Financial Advisor’ to be able to dispense currency strategies and currency research.
You also have the option of conducting webinars, seminar and special sessions for your clients and potential customers in an effort to introduce them to the world of currency trade and also assisting them to conduct their trades profitably with your professional expertise.
A currency strategist with pleasant personality and effective communication skills is high on demand in many places and it serves them well to market their trade in the best possible manner that is helping people optimize the returns on their investment through the brilliance of their research, hard work and sharp currency focus.
6. Manage Assets of High Net Worth Individuals
Now with this we move to a very niche area of wealth management, that of the many high net worth individuals who dot the face of the planet. Let’s face it not all of them are George Soros and neither do they all possess the sharp focus of Warren Buffet. Yet the fact is they all have money, and that needs to be managed.
If you have the capability and the academic backing, this can well become the career of your choice where you manage the wealth of a select group of individuals. Of course, this also means your expertise cannot be limited to just the currency market, and you need to possess a well-rounded view of world financial markets. But surely currency forms a key participant to any kind of asset management approach given the huge daily turnover as well the timings, and the intense sensitivity to most macro developments world over.
You can easily choose to employ your currency market skills to maximize your client’s profit margins, decide what is a good time to enter or exit the market and also bring about a distinct difference in your client’s return portfolio. Given the close connection between these High Net worth Individuals, once your credentials become popular, money or job would never be.
This was just one of the ways to make money through currency market.
7. Open Money Exchange Agency
This one is an obvious choice when you have a fairly strong idea of the currency market dynamics. You can easily get permission to launch an agency that helps people to exchange currency. Your market understanding and close study of the charts will help you decide on the best possible rate for your clients that also ensure that your profit kitty is not disturbed.
This is again a fairly low investment business with basic capital required for starting a business. Every transaction here too yields a certain amount as transaction or service charges that cushion your profit margins and ensures that the client gets maximum value for every dollar he or she exchanges.
A know how of the currency market works in your benefit because depending on the market move you can choose to buy out extra units of a specific currency cheap or sell it off on a rally in anticipation of some news. In this way you can also manage your return ration on buying and selling of currency in the international market and how you can make every penny count: How to Run a Money Exchange Business that Makes Money
8. Working With currency Trade Regulators
This one might surprise you, but job opportunities for the money market regulator are also a strong possibility with your currency market training. As we all understand, the regulator’s job is to identify fraudulent transactions and work on the various norms and guidelines that dictate money market trading in a way that eases execution of the trade.
Most regulatory bodies hire many professionals and given the stature and expanse of currency trade need presence across multiple nations. There is a good mix of Government operated and private set ups to man the functioning of these markets. Many economists, futures trading specialist and management professionals are employed by them to analyze currency trades and push forth investigation wherever necessary.
These professionals in their individual capacities work towards understanding the economic impact of the guidelines devised by the regulator, instances of monetary manipulation and chances of the fraudulent transaction if any. Essentially they aim to help the smooth execution of currency trade with no loopholes for the mischief makers to thrive.
9. Hold currency Trading Tutorials
The absolute number of people who want to invest in the currency market but are unable to do it is mind boggling. The problem is many do not have access to the internet or might not be confident with English, which is the standardized mode of communication for most websites with a global presence.
In that case this provides you with a golden opportunity to optimize the returns from your understanding of the currency market in your neighborhood. You can work with potential investors in classrooms initiating them into the basics of currency trade as well as creating a platform for them to conduct trade. In this way, you act as a currency teacher and a broker at the same time. Needless to say, these services come at a cost depending on your individual expertise.
Again, first you have to be a good currency trader to run such a business. How can you teach something that you are not 100% skilled in it?
Unfortunately I have see so many currency teacher who are not real traders at all, and the advice and lessons they give to their students not only don’t make any money for them, but cause them to lose.
It is good to teach people how to trade currency, but you have to be a good currency trader first.
10. Write Columns in newspapers/Make TV Appearances
The media have a big role to play in today’s financial market transactions. Just the sheer number of business news channels or business news papers that are in circulation in recent times bears testimony to the fact. So while you might be a currency trader during the day, you can well choose to be a newspaper columnist simultaneously or voice your expert views on Television.
Think of George Soros or Jim Rogers. When they speak on the Television screen about the next big trend in currency market, everybody sits up and listens. So would they too for you if you have a track record of being a successful dealing room trade or sharp technical trader with an ability to rattle out a long stream of unending target prices for the average viewer. Most experts who speak on TV or write columns charge a fee for their appearance or the write-up and quite rightfully so. So if you think you have it in you just go forth and just jump into the race.
Thus to draw curtains, currency trading is a unique platform that opens up a diverse range of opportunities for all those who are willing to take the plunge. The need is to think out of the box and aspire to make it big in your chosen field of action. The rest, as they say, just follows.
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