Trade Forex with CPT Markets UK
Open 24 hours a day, 5 days a week, the foreign exchange market is the largest and most liquid market in the world with volumes of over $$ trillion a day, surpassing any exchange-based market.
Foreign exchange trading involves trading one currency against another, predicting which currency will rise or fall, and then deciding which other currency it will move against. For this reason, currencies are traded in pairs, such as the Euro versus the US Dollar (EUR/USD).
While a lot of foreign exchange is done for practical purposes, the vast majority of currency conversion is undertaken by forex traders with the aim of earning a profit. The amount of currency converted every day can make price movements of some currencies extremely volatile. It is this volatility that can make FX so attractive to forex traders: bringing about a greater chance of high profits, while also increasing the risk.
How Does Forex Trading Work?
Unlike shares or commodities, forex trading does not take place on exchanges but directly between two parties, in an over-the-counter (OTC) market. The forex market is run by a global network of banks, spread across four major forex trading centres in different time zones: London, New York, Sydney and Tokyo. Because there is no central location, you can trade forex 24 hours a day.
One of the key advantages Forex has over other financial instruments is that relatively small lot sizes can be traded – lot sizes can be as small as 1000 units (one micro lot). Typically, foreign exchange also involves leverage which in some cases can be as high as 1:300, which is very different to trading shares where no leverage is involved.
Leverage allows traders to trade in the markets in much larger size than they actually hold in their trading account. For example, if you had 1:100 leverage you could use a $1,000 deposit to control $100,000 worth of currency. Using leverage can result in an increase in gains, however, if not used correctly it can also result in increased losses.