Forex Trading

Why you should invest in foreign currencies:

  • the market is vast and highly liquid; it’s the largest liquid market in the world, its daily volume exceeding $4trillion.
  • it’s highly versatile; you get to diversify your portfolio and avoid risks related to the US dollar as a stand-alone asset.
  • 24/5 availability; the market is open ‘round the clock, five days every week; total trading availability duration exceeds that of traditional equities, bonds or futures market.
  • slim costs; you don’t need to pay a commission, just a bid/ask spread that trumps equities.

Wondering about the risks? Here’s a brief overview:

  • the leverage is pretty high; since the market moves in tiny increments, margin leverage becomes a must and brings about high risks for those who invest.
  • major volatility; regular economic reports impact the currency market, so increased volatility is to be expected.

You can either invest in foreign currencies directly or through ETFs.

Here’s how the direct alternative works:

Once you choose a foreign exchange broker, you can directly buy or sell foreign currencies on margin. Initial deposits vary from $300 to $500, and margins range from 50:1 to over 10.000:1. The rule is: the higher the leverage, the greater the risk. Take your time selecting a reliable broker, because this market does not follow standard regulations. Always choose a regulated broker.

If you choose to use ETFs, leverage is lower, so risks diminish. You don’t need to contact a foreign exchange broker, since the traditional kind will work just fine.

Currencies, like most assets, are impacted by major economic events, so volatile economic times take their toll on your investments. They are, however, a great way to diversify your portfolio. Another up-side is that the news that directly influences currencies can be accessed in real-time, there is no “inside” information you don’t get access to that might impact currencies.

How to minimize risk

The ideal way is to choose currencies from the countries you are familiar with, economy-wise. Follow the news closely, check out the events that might have an impact on the countries you’re interested in and spread your portfolio. Do not go all out on a single currency; choose countries that have a stable banking and financial system, start in a slow pace to evolve along the way.

What impacts currency shifts

Prices can shift swiftly according to global events and latest news, but they also change when many traders choose to buy/dump the same currency. Political movements, monetary policy as well as natural disasters impact currencies, especially major ones, like the Dollar or the EUR.

Conclusion

Just like any other trading field, currency trading involves risk and potential gain. You can contact various financial advisers that can offer useful tips in the field as well as help you assess risk, but at the end of the day you are the only one who can make the final decision.

Majors

SYMBOLDESCRIPTIONTRADING HOURS
(MT4 TIMES)
CONTRACT SIZELEVERAGEMINIMUM TRADE
(SIZE IN LOTS)
AVERAGE SPREAD
EURUSDEuro vs US Dollar24hrs1,00,0001,2000,102,40
USDJPYUS Dollar vs Japanese Yen24hrs1,00,0001,2000,101,60
AUDUSDAUD vs USD24hrs1,00,0001,2000,102,40
USDCADUSD vs CAD24hrs1,00,0001,2000,102,40
NZDUSDNZD/USD FX SPOT RATE24hrs1,00,0001,2000,103,60
USDCHFUS Dollar vs Swiss Franc24hrs1,00,0001,2000,102,80
GBPUSDGBP vs USD24hrs1,00,0001,2000,104,00

Crosses

SYMBOLDESCRIPTIONTRADING HOURS
(MT4 TIMES)
CONTRACT SIZELEVERAGEMINIMUM TRADE
(SIZE IN LOTS)
AVERAGE SPREAD
CADJPYCAD vs JPY24hrs1,00,0001,2000,107,90
AUDJPYAUD vs JPY24hrs1,00,0001,2000,107,20
EURGBPEuro vs GBP24hrs1,00,0001,2000,102,80
EURAUDEuro vs Australian Dollar24hrs1,00,0001,2000,109,60
EURJPYEuro vs Japanese Yen24hrs1,00,0001,2000,103,60
EURCHFEuro vs Swiss Franc24hrs1,00,0001,2000,102,00
CHFJPYCHF vs JPY24hrs1,00,0001,2000,108,00

Cryptos

SYMBOLDESCRIPTIONTRADING HOURS
(MT4 TIMES)
CONTRACT SIZELEVERAGEMINIMUM TRADE
(SIZE IN LOTS)
AVERAGE SPREAD
ETHUSDEthereum vs US Dollar24hrs11,50,1050,00
BTCUSDBitcoin vs US Dollar24hrs11,50,10150,00
XRPUSDRipple vs US Dollar24hrs10,0001,50,50300,00
LTCUSDLitecoin vs US Dollar24hrs11,50,10800,00