What is Currency Trading?
When you open a currency trade in the Forex market, you pick two currencies, and buy one and sell the other at the same time. For example, if you have an EUR/USD pair quoted at 1.07905, this means that if you sell one euro, you can buy 1.07905 dollars. To close your trade, you then sell the currency you originally purchased, while simultaneously buying the currency you sold in the first transaction. Investors hope to make a profit by timing the opening and closing of trades for times when they have correctly price read trends.
Currency trading, at its heart, involves rating the economy of one country against another. When the economy of a country or region is doing well, prices for its currency go up. When the economy of a country or region is doing poorly, prices for its currency go down. Forex traders keep constant track of different countries and/or regions to get an idea of whether their currency prices are trending up or down. Although there are dozens of currencies that you can potentially trade, the vast majority of forex transactions involve the currencies of one of eight different countries or regions: America, the Eurozone (including France, Germany, and Spain), the U.K., Switzerland, Japan, Australia, New Zealand, and Canada.
How Does Currency Trading Work
The forex market has two tiers of providers who can grant access to currency traders: the Interbank Market, also known as Tier I liquidity providers; and the Forex Dealers, or Tier II liquidity providers. Tier I institutions include national Central Banks that handle the reserve requirements for major countries and receive the lowest rates on trades due to extremely high volume. These providers process approximately 50% of forex transactions. Tier II institutions serve as the intermediary brokers between the Interbank Market and the retail trader.
A Brief History of Currency Trading
Originally, only Tier I providers were eligible to participate in the currency market because retail traders could not access the tools needed to buy and sell through the Central Banks, and there was a lack of brokers who were willing to pool orders from multiple traders to take advantage of these opportunities. However, in the late 1990s, internet access became more widespread. Eventually, private individuals heard about the profit potential of foreign exchange transactions and demanded a way to compete. This led to the creation of a number of brokerages who developed electronic forex platforms which make it possible to trade online.
Risks of Forex Trading
When considering whether to enter into the forex market, traders should keep in mind that there are a number of hidden costs. There is always a difference between the buy price and the sell price of a currency pair. This difference is called the spread. To make any profit, you need to wait until the price has moved enough to cover the spread. Also, when a Forex trade is held after 5 pm EaWeiss time, you may encounter a rollover. This is the interest that the Central Banks associated with the currencies you are trading has said is owed or should be paid for that day. If you do not close your trades in time, or if you do not pay attention to the interest due, you can find rollover costs eating into your profits.
Another risk of Forex trading is volatility. Forex investors react quickly to market news, and even though the online trading systems are extremely fast, sometimes they can’t keep up with prices as they change within microseconds. This means that it may not be possible to close a trade without losing more than your initial investment, even if you are diligent about using a protection feature called a stop-loss, which tries to automatically close trades at a point you select. Most Forex brokers make sure clients are aware that they can lose more than their initial investment.
Why Trade Currencies Using Binary Options
One way to make forex trading easier is to try currency trading through a binary options broker. With binary options, you no longer need to worry about the spread, rollover, or the perfect time to close a trade. Currency traders who work with Binary Options only need to specify whether they believe that the price of the currency pair is going up or going down. The profit for a successful trade is posted before the trade is opened, and binary forex trading also limits losses to the amount of the initial investment, so there is never a surprise debt that needs to be cleared.
Commodity markets are well-established and traders who deal in them traditionally use futures contracts to buy and sell them. Commodity markets use a set of minimum quality and quantity standards or standard measures. For example: ounces and kilograms for metals, bushels for wheat, barrels for oil. However, this is not the case for commodities in the binary options context.
With binary options, you don’t actually buy or sell anything physical at all. You are only interested to invest an amount of money on a contract which is concerned with a prediction about what the market price of the commodity will be at the end of a given time-frame.
A binary options contract is not a bill of sale or a certificate of ownership. It is a contract that ties an amount of your capital that you decide to invest on the actual change in the market price within a specified time limit.
With the Weiss Finance trading platform, you can invest as little as $25 on a single contract. Profit levels are high for commodities in binary options contracts, typically reaching 80%.
Our online platform makes it easy for you to invest anywhere and at any time, and make high levels of profit from the commodity markets without needing a warehouse to store your sacks of coffee or wheat, bars of gold and silver etc.
Moreover, you don’t have to predict exactly what the price will be at the end of that time limit, only whether it will be higher (a ’Call’ option) or lower (a ‘Put’ option). Instead of buying and selling, you are predicting whether the market price will be higher or lower than the market price at the moment you make the contract.
We invite you to consult with your Weiss Finance account manager today for more information.