Buying and selling currencies online
Also called the ‘Foreign Exchange’ market or ‘Forex’, the currencies market is a highly interesting market for individual investors.
It enables speculation on the exchange rate of currencies between themselves and thereby the opportunity to make profits on the rise and on the fall.
Definition of the Forex:
The currencies market is more generally called the ‘Forex’. This term comes from an abbreviation of the term ‘Foreign Exchange’, meaning the market for exchanging foreign currencies.
When we consult the currencies market, we cannot consult the rate of a single currency, we have to look at the rate of a currency pair. For example, if we look at the currency pair EUR/USD, this corresponds to the exchange rate of a Euro quoted in U.S. Dollars. To put it simply, if the EUR/USD rate is 1.25 this means that a single Euro equals 1.25 U.S. Dollars. This quotation is expressed in ‘pips’.
The operation of the currencies market:
The exchange rate of one currency as compared to another is fixed according to different criteria which basically depend on the proportion of buyers as compared to the number of sellers of a currency pair.
When speculating on the currencies market, we can either buy a currency pair, which means we believe its rate will rise, or on the contrary, sell it, in which case we believe its rate will fall.
To summarise clearly, when we buy EUR/USD, this means selling U.S. Dollars to buy Euros. On the contrary, if we sell EUR/USD, we sell Euros to purchase U.S. Dollars.
Advantages of the currencies market:
As indicated in the introduction, the currencies market is a highly advantageous market for traders due to:
- Its strong liquidity: it is possible to invest small amounts as well as large amounts, even up to several million dollars on the market due to its high liquidity. The currencies market is the largest market in the world and accounts for nearly 3,000 billion transactions every day.
- Its continuous quotation: The currencies market is accessible 24h/24, during five working days a week. It is therefore possible to complete transactions at any time.
- Its leverage effect: When trading in currencies, you can benefit from the leverage effect that multiplies the profit by a ratio ranging from 100 to 400 of the profit amount, however this is also applied to a loss.
- Its low fees: The majority of intermediaries that enable you to trade on the Forex do not deduct commissions. They earn money through the spreads that correspond to a slight difference between the true price of a currency pair and its sell or purchase price.
Forex brokers for buying and selling currencies online:
The best way to speculate on currencies online is undoubtedly by passing through a Forex broker, an online broker specialised in this sector. These brokers offer simple but effective trading platforms to their traders, thereby enabling them to place buy and sell orders from their homes simply by using a computer connected to the internet.
The only thing you need to do to start buying and selling currencies online is to register with a broker and create your trading account with an initial deposit.
You will thereby be able to access a trading platform through your broker with all the functions such as charts, different orders and tools to assist with your decisions such as trading signals or technical indicators.
How to buy and sell currencies online?
Let us now look closely at the way currencies are bought and sold online. The foreign exchange market in fact operates slightly differently from the other markets such as the stock market. Here you do not speculate on the price of a single asset but rather on the rate of a ‘currency pair’.
This rate actually corresponds to the exchange rate of one currency against another. For example, with the EUR/USD pair, the rate expresses the exchange rate of the Euro in American Dollars. If this rate is 1.50 pips this means that one Euro is equivalent to 1.5 U.S. Dollars.
By buying or selling a currency pair, you are therefore speculating on the rise or fall of the related rate. Let us imagine that you take a buying position on the EUR/USD pair at a rate of 1.50 pips for €100 and you use a leverage effect of 1:200. If you resell your currency pair at a rate of 1.60 pips you will profit from the difference in pips, multiplied by the amount of your investment and the leverage effect applied, that is: 0.10 X 100 X 200 = 200. You will therefore make a profit of €200.
As you may have understood it is actually quite easy and fast to make profits by investing in foreign currencies.
Why follow the currencies rates in real time?
Although it will be unlikely for you to want to capitalise by speculating on currencies rates at any time throughout the day, particularly if trading is complementary to your main professional activity, having the possibility of following the movements of currencies rates in real time does offer certain undeniable advantages.
In fact, by following the trends in real time you can anticipate advantageous opportunities and take position at the right time.
How to access currencies rates in real time?
There are various solutions available that enable you to follow the currencies rates in real time. In particular, you can use websites that are specialised in finance, or simply follow the charts available through Forex brokers.
Indeed, on the majority of the trading platforms you will find real time charts that are also available for smartphones or tablets.
Speculate in real time on the foreign exchange rates:
The Forex brokers enable you to speculate on the exchange rates of the different currency pairs using a computer or a tablet. Start investing now and make some major profits.