Best Investment Brokerage Platform for Forex 2024

Forex is short for foreign exchange and it is also known as FX and currency. Forex trading is buying and selling of currencies to make a profit by taking advantage of price movements between different currencies.

People usually trade forex in currency pairs such USD/EUR. Take note that the base currency is the first currency symbol in the pair while the second is the quote currency. For USD/SGD, the base currency is USD while quote currency is SGD. Price of the base currency is calculated in units of the quote currency.

For example, you buy 1,000 units of USD. Assuming the exchange rate is SG$1.40 to US$1. So to buy 1,000 units of USD, this trade costs SG$1,400. A few days later, the SGD weakens against USD and the exchange rate becomes SG$1.55 to US$1. By selling the 1,000 units of USD you have, you would have made a profit of SG$0.15 x 1,000 = SG$150.

When you borrow money from the broker to trade, this is called leverage. This allows you to trade with more than just your own capital. However, this is a huge risk as you are essentially betting that you will make more money from your forex trade to offset the amount you have borrowed from the broker. Leverage is often used by forex traders and in huge sums, which results in a high risk of making huge losses.

While forex and stock trading are similar in terms of liquidity, they are not the same. Unlike the stock market, currency trading is a zero sum game. This means that for someone to gain, someone else has to lose. However, in the case of stocks, there can be a situation where there is overall gain.

Stock markets are generally considered high risk. However, the fluctuations in the forex market are generally way more violent. Many big forex players make use of huge sums of leverage which allows them to move from a strong position to a weak position in a very short amount of time. Hence, it is highly not advisable for you to trade forex unless you can commit to long hours to frequently monitor the forex market. of the big forex players use enormous amounts of leverage.