Since the start of 2018, Foreign Exchange Trading volumes have been rising sharply. This is due to continued depreciation of the U.S. dollar. Following comments made by the U.S. Treasury Security advocating acceptance of the weaker dollar, central banks have toned down their stimulus, which in turn has cranked up currency markets. New data reveals that investors are upping the ante, with major increases in fixed income trading. CFD premium
FX trading has been in a slump for awhile now, with record liquidity levels halting investor profit. Now that central banks have agreed to back off, the increase in FX volatility is spurning more activity. Investors are wagering substantially as it is uncertain how long such developments will last. For anyone looking to get involved with Forex trading, now is certainly the time. Wig Markets
Foreign exchange trading, otherwise known as Forex or FX trading, is the market where currencies are exchanged. It determines the foreign exchange rate, and includes all aspects of selling, buying, or trading currency volumes. The FX market is the largest market in the world, trading the largest asset volume globally. Most of the trading is done between large international banks, with financial centers functioning as global anchors. Trading is completed around the clock, as time differences cause various markets to be open at all hours. The market is also completely liquid, with trillions traded every day. All transactions are done over the counter, meaning they are performed electronically.
The market was created out of the necessity to exchange foreign currencies for product. A person from London purchasing a product in France cannot pay with their own currency, because France does not deal in pounds sterling. So the money has to be exchanged into euros. In order to facilitate such transactions the Forex market was formed. Investors can exchange monies back and forth using currency pairs. As the exchange rate fluctuates, they can earn a profit if they trade at the right time.
The most commonly traded currency pairs go against the almighty US Dollar (USD), but there are other major pairs as well. Investors go back and forth between the Euro Dollar (EUR/USD); the British Pounds Sterling (GBP/USD); Japanese Yen (USD/JPY); and Swiss Francs (USD/CHF). As the exchange rate fluctuates, currency values will rise and fall. The idea is that investors will purchase currency at a low rate, and then sell it when it increases value. An example would be someone purchasing Euros with U.S. Dollars. As the dollar rates higher than the euro, the exchange will lead to more euros being purchase per dollar. Should the euro increase value, rising above the dollar, the currency can be sold back. As the exchange rate has fluctuated a euro now buys more dollars, and the investor makes a profit. Investors use a wide variety of buying and selling strategies, but the general idea is to use the fluctuations to increase the currencies value via exchange.
FX volumes hit record highs on all platforms January, following a sweep of regulation in Europe. The regulations have established new rules that increase transparency in the market. February saw a further increase of 14% over Janurary’s tally, hitting a value of $2 Trillion. Despite all of this the currency pair lauded as the most traded, the euro to dollar pair, still held below the long-term average. Short term averages did increase however, and the spark of activity promises to make more money as the prices widen. Such volatility will be welcomed at investment treading desks as previous years have been far too calm.
A simple explanation of FX trading