Definition of Currency Trading
Currency trading is the process of investing in world currencies. It involves buying and selling currencies to take advantage of variations in exchange rates.
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Facts
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Currencies are traded on the Foreign Exchange (Forex) market. It's the largest financial market in the world, moving upward of $2 trillion each day.
Uses
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Financial institutions, multinational corporations, and major hedge funds are normally involved with currency trading. The rise of Internet trading has opened the Forex market to individual investors.
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Features
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Currency trading typically involves the seven most liquid currency pairs in the world: the Euro/U.S. dollar, the U.S. dollar/Japanese yen, the British pound/U.S. dollar, the U.S. dollar/Swiss franc, the Australian dollar/U.S. dollar, the U.S. dollar/Canadian dollar, and the New Zealand dollar/U.S. dollar.
Considerations
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Currency trading is entirely self-regulated, with no central governing body overseeing transactions. All trades are based on credit agreements, requiring traders to not only compete with one another but also cooperate.
Benefits
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There's no insider trading on the Forex market, nor are there any broker commissions or limitations on the size of an investor's position. Currency trading is also the most accessible market in the world, trading 24 hours a day from Sunday evening to Friday afternoon.
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References
- Photo Credit Image by Flickr.com, courtesy of Miss Izs
