The constant fluctuation of the prices of currencies against each other (in pairs) in the financial market has given rise to speculation and trading on forex. Due to the huge amount of currencies converted every day, the prices of some of them can be extremely volatile. It is this volatility that makes the forex market so attractive to investors, as it offers greater earning opportunities (but also increases the risk of loss).
What is forex trading?
Forex trading is the activity of taking a position on the fluctuation and changes in the prices of currencies. Note that currency exchange transactions are a common activity, practiced every day 24 hours a day on a global scale by different entities such as governments, banks and even individuals.
Forex investors seek to exploit the ups and downs of currency price movements to make money by buying and selling one currency against another, based on economic or graphical analysis.
If, for example, a trader expects the dollar to rise against the euro, he will buy the EUR / USD pair. If, on the other hand, he believes that the dollar will fall rather, the investor will sell this currency pair. He makes a gain if his prediction was right and incurs a loss if he is wrong.
If forex is the most accessible market in the world, keep in mind that this form of investing is complex, difficult to manipulate, and can lead to gains as well as losses.
This is why it is important to learn how to control forex risks by opting for a broker that offers proper risk management tools and a demo trading platform that will provide access to a simulation trading environment where you can test the your trading strategies.
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IG demo account on our online trading platform.