Forex Trading
Forex is retail trading of the foreign exchange market. There are many forex companies who are operating honestly with regulation and procedures followed. Unfortunately there are companies who have given this field a bad name.
What is the foreign exchange market?
The foreign exchange market involves the purchase of forex investments using the currency of one country to buy forex with the currency of another country. The most popular currency combination is Euro to US dollar. The amount that a person can purchase depends on the foreign exchange rate. This rate is based on the current trading market values and increases and decreases regularly depending on trading levels.
Cash forex can be traded 24 hours a day using forex brokers. This is a very profitable business. Brokers convert client funds into the broker profit as accounts lose money. Some brokers take commissions instead of working against trade and profiting. This is known as netting the spread in forex.
Retail Forex Platform
What is the retail forex platform?
Retail forex platform is when brokers go against the normal trading patterns to create a profit for themselves as the account loses funds.
The government is now enforcing regulations that have been implemented. Minimum capital requirements have changed to $20m in the US. Regulations have been forced in other countries as well, like Germany and United Kingdom.
Machine based trading is being employed more frequently with new investment packages being created regularly. The investing client can also customize the packages to suit his or her investment needs. An individual can invest according to his or her own forex trading system.
Forex trading is very popular online. Online forex trading began in 1996 and has grown since then. Online investors would go against the retail trading forex market to create a method for people to invest in and sell their forex holdings.
Online forex exchanges do not involve delivery to customers and the trade will be closed. Leverage is offered to investors. Forex leverage is higher than the stock market.
What is leverage?
The term leverage refers to the use of investment funds or borrowed money to increase the rate of return. When an individual or company has more debt than investment equity is leveraged.
High Leverage in Forex Trade
High leverage is an important issue in forex trading, but unfortunately not easy to understand. The retail forex market allows for 100% leverage but the investor must part with a good sum of money for loss protection. Because of price swings it is easy to take a loss and not easy to obtain a high leverage.
Brokers typically do not allow clients to lose their investment and be “in the hole” so to speak. A client must be in the positive without having to make up for a loss. This is to prevent the investor from incurring a larger loss.
The retail forex platform provides information regarding the investors’ equity, balance and amount of margin remaining for future investments without taking a large loss.
Always think things through when deciding to enter the forex market. Find a good broker that is honest and can give sound forex investment advice.
