Exchange Trading: what is this?

Foreign Exchange Trading is when investors speculate on the movement in exchange rates between two currencies. It is quite similar to investing in shares on one of the stock exchanges where investors buy into the shares of a company speculating that the share value will increase. With foreign exchange trading, the investor is speculating that the rate of exchange will move in a direction that will increase the value of the investment.

The global foreign exchange trading market has a daily turnover of around $US3.7 trillion and it’s not just the large multinational conglomerates that are trading; now any individual can open an online trading account. The number of smaller online traders has really grown in recent years. This has been brought about by the ability to open an online account with just $100 and make money (or lose it) from volatile markets and currencies. This has made exchange trading very accessible and easy to become part of.

Exchange trading can be adrenaline pumping and may even see further increases in take up as the activities of day traders on stock exchanges are analysed and restricted more. But just as the benefits can be high, so too are the risks, which can be particularly pertinent if you look at the volatility of the foreign exchange markets in recent months.