Foreign exchange trading, which is commonly known as Forex trading, is the practice of buying and selling the money market for profit. As a global market, forex investing occurs all over the world. The largest markets are in major financial centers such as New York, London, Tokyo, and Hong Kong. The forex market is huge and consists of various companies including banks, financial/commercial institutions, and brokers who speculate on the movements of currency pairs. Find out more about forex on http://www.vixbrokers.com/minimumdeposit/exness.html.
Apart from the forex market requires a small amount of capital to enter, the low transaction costs to start trading are another reason. Usually, brokers earn their income from the spread, which is measured in pips and included in the price of the currency pair. A pip means “Percentage Point” and is a unit of measurement used to show the change in the value of one currency against another.
When a broker offers a currency pair, they will tell you the bid (sell) and sell (buy) prices. The difference in pips between the two shows the margin and the relative amount that you pay the broker. Spreads are generally low, which makes forex trading relatively cheap. However, you should consider all the costs associated with choosing a broker as some may charge a flat fee or a variable fee.
Of all the reasons for forex trading, the availability of leverage is perhaps the most attractive, allowing you to open high positions with relatively small capital. A large number of forex brokers – including FXTM (Forextime) in Malaysia – allow traders to place and take loans for a much larger portion of the control, such as mortgage deposits in real estate consultancy. Existing leverage is expressed as a ratio and most controlled forex brokers limit the maximum leverage for traders, with averages of 1:30 and 1:50. So if you like 1:50 leverage, you can sell up to 50 euros for every 1 euro equity in your account. While this opens up the potential for bigger profits, it can also lead to bigger losses. Therefore, leverage should always be used with care.