FX Trading Guide: Trade Forex with our Easy-to-Follow Guide

SINGAPORE, March 15, 2012 /PRNewswire/ --

FX trading is the act of simultaneously buying one currency and selling another at an agreed exchange price on an over-the-counter market. The foreign exchange market is the most liquid financial market in the world, with an average volume of USD 4 trillion per day. Compare this to the New York Stock Exchange with its average daily turnover of around USD 50 billion and you can see just how popular forex trading is.

With this in mind, FX - also known as foreign exchange and forex - is the largest financial market in the world.

Use this guide to find out why traders choose to trade FX, how it is priced and the commonly traded currencies in the FX markets.

Why choose FX trading

The FX markets and prices are largely influenced by international trade and investment flows.

Prices are also influenced by economic and political conditions, including interest rates, inflation, and political instability. As a result, currency prices constantly fluctuate in value against each other opening up multiple trading opportunities.

With this in mind, it is important to consider the impact that economic and political conditions have on currency prices, which is commonly short-term.

This can make trading FX attractive to trader as it offers some of the diversification necessary to protect against adverse movements in the equity and bond markets. 

How FX is Priced

All FX markets and spreads (currency pairs) are quoted in terms of one currency versus another.

Each pair has a 'base' and a 'counter' currency. The base currency is on the left of the pair and the counter currency is on the right.

For example, in EUR/USD, EUR is the 'base' and USD the 'counter'.  

Price movements are triggered by currencies either appreciating in value (strengthening) or depreciating in value (weakening).

For example, if the price of EUR/USD falls, this would indicate that the counter currency (USD) was appreciating, whilst the base currency (EUR) was depreciating. 

In turn, this allows traders the opportunity to profit from a fluctuating market, which, as mentioned above, is common with FX.

Commonly traded currencies

The most popularly traded currencies are shown below:  

• USD - United States Dollar
• EUR - Euro
• JPY - Japanese Yen
• GBP - British Pound or Sterling
• CHF - Swiss Franc
• CAD - Canadian Dollar
• AUD - Australian Dollar
• NZD - New Zealand Dollar

Summary

FX trading with City Index Asia opens up multiple opportunities for traders wanting exposure to the largest financial market in the world.  Additionally, it offers some of the diversification necessary to protect against adverse movements in the equity and bond markets; making it an attractive option for a range of traders.

However, trading on margin carries high risk and may not be suitable for some investors. The possibility exists that you could lose some or all of your investments, including your initial deposits.

Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

City Index is a leading global provider of margined foreign exchange, CFD trading and in the UK, spread betting. As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. To learn more visit: http://www.cityindex.com.sg/