What is Foreign exchange?
Foreign exchange is defined as a mechanism by which one foreign currency is converted into the currency of any other country. This is done by banks and big financial institutions like XFR Financial Ltd. It is the stock of foreign currencies and other assets. The nature of foreign exchange is as follows-
- Affected by the laws of demand and supply
- Affected by rate of interest
- Affected by inflation rate
- Affected by the economic condition and stability of the country
- Affected by balance of payments
- Affected by the fiscal policy implemented by the government
- Also affected by the political condition of the country
What is an exchange rate?
One of the first things XFR Financial Ltd will teach you is that there are two types of exchange rate and they are fixed and flexible exchange rate system. Fixed rates are helpful in providing a greater stability to the system. Flexible exchange rate is the floating exchange rate which changes freely and is determined through trading in the Forex market.
Forex market for beginners-
- Forex market is the world’s largest financial market where more than 3 trillion USD is traded on a daily basis.
- Forex market is the market where currencies are traded.
- All trading is based on buying of one currency and simultaneously selling other. This is because value of one currency is determined through the value of other.
- The first currency in a pair is called base currency and the other is counter currency.
- Forex market operates continuously i.e. 24 hours a day except weekends.
- The use of leverage can be done to enhance the profit and loss margins while depositing a small sum only.
- The big participants of Foreign exchange market are Commercial companies and Central bank. Commercial companies trade small amounts as compared to banks and their trades have a little effect on the market rates. National central banks have an important role in FX market. They try to control inflation, interest rates, money supply and have major impact on Forex rates.
Tips and rules for trading currency at XFR Financial Ltd
- Plan your trade properly and then trade according to your plan
- The current trend in the FX market is your friend
- Focus always on preserving the capital
- Know and learn when to cut the losses
- Take the maximum profit when the trade is good
- Always be emotionless while trading in FX market
Common mistakes of Foreign exchange traders
- When they trade out of anger or boredom
- Expecting unrealistically
- Not using stop at the proper time
- Going for unnecessary risks
Thus FX market is a wide market and developing strategies and a proper plan at XFR Financial Ltd will certainly help you in earning profits. But the risks involved should also be considered in FX market and insensible trading should not be done. Taking proper Forex tutorials and reading strategies and analysis will surely help in be a successful Foreign exchange trader and make profits.