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Things to consider before investing in the Forex market

Things to consider before investing in the Forex market  

The (Foreign Exchange) Forex Market is the largest financial market in the world. Currencies of different countries are traded in this market. The estimated daily currency exchange is this market is 4 trillion dollars.  

What is forex?


Forex is nothing but foreign exchange. The exchanging of various currencies in the world is carried out by currency trading in the money market.
  This is a comparatively unfamiliar ground for retail traders. Originally only the multinational corporations and big financial institutions used to trade in this market. Now, with the advent and popularity of online trading, individual investors are also venturing into this market and find it fascinating and lucrative.  

How does the forex market differ from other markets?


Firstly, the forex market consists of approximately eight important currencies of the world. This is unlike the stock market where innumerable shares are traded daily. This ensures a narrow focus and easy understanding of what is happening in the forex market.   However, the flip side is that there is no central regulatory body overseeing the currency trading and most of the trading is carried on based on credit agreements. Business here is the largest and in liquid form.  

Forex Market cannot be cornered


It is difficult to corner the market due to its colossal size. Even large financial institutions are also unable to control this market over a long time period. This makes it an ideal place for the small investors to invest.  

Some of the terms used in Forex trading:
  PIP

A PIP is the "Percentage In Point" (PIP). It is also called as "Point". It is calculated as the minimum price increase of a Forex trading rate. 0.0001 is the most common PIP.  

Ask price
The price that you buy a currency at is the ask price. The market is agreeable to sell the currency at this price.  

Bid price
The price that you sell a currency at is the bid price. It is the price which the market is agreeable to pay you for this specific currency.  

Spreads
Spread is the difference between ask price and bid price.  

Currency rate
The rate of the currency against another currency.   Define your risk capacity, plan your goals, get a forex trading account, select a broker carefully and start investing in the Forex Market.  

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