Forex Trading is the trading of currencies. Traders simultaneously buy one currency and sell another aiming to profit from changes they predict in the market.
The Forex Market is the largest and most liquid market in the world and can be extremely lucrative, however as with all forms of trading, also incredibly risky. If you are planning to go into Forex Trading, ensure you are properly informed and have done significant research into how it works.
How Forex Trading Works?
Forex Trading work similarly to other kinds of trading. Where it differs, is its prevalent use of ‘leverage’. Generally, leverage means the use of borrowed funds, and it can be used across all of the trading platforms but is particularly part of the norm in Forex Trading.
Should I use leverage in while trading in forex?
The use of leverage can be incredibly beneficial, especially if you’re starting with a small capital investment. Its use means your initial investment to put on currency trading positions can be multiplied by up to 50 times (the maximum leverage allowed in the U.S.). In this way, profits can be made much more quickly and at a much higher percentage than if you had invested your original capital alone.
However, while leverage can increase your trade earnings 50-fold, it leaves investors open to much greater losses as well. It is incredibly important to be aware of all the risks involved in all kinds of financial trading, but especially when trading in borrowed funds.