Converting one currency into another is called forex trading. The main purpose of doing so is essentially to make money by speculating which currency will move up or go down. Multiple trading platforms exist to aid investors in making fast and easy transactions.
Also known as the FX market, the Forex market is a cloud-based global money market where all currencies are traded. With increasing globalization, all trading markets have become extremely popular for daily transactions. However, Forex remains the biggest financial market in the world.
This is exactly why the FX market is not centralized. Currencies need to be traded everywhere at all times. The market operates from Monday to Friday and half a day on Saturday.
Because of various timezones, the market is open 24 hours a day. When it closes in the US, it opens in Asian countries where the day is just beginning.
The best part is that Forex trading is for everyone. Research by Daily Forex revealed that 72% of participants had no experience trading before Forex, and the majority had just started trading 1-3 years ago.
Regardless of your prior experience and location, you can make orders via online trading platforms or apps like Liteforex. These apps allow investors to view real-time information from anywhere, trade within seconds and have optimized software to help buyers and sellers make the best decisions.
However, an app alone isn’t sufficient to become successful. Investors use a number of strategies to predict market trends. For example, Bollinger Bands is one of the most widely used strategies. It uses a formula to calculate how much deviation can be expected in current trends:
The red line shows both upper and lower deviations, which helps investors predict short-term changes in prices.
Investors have made billions through FX trading, and there are two simple reasons behind that.
Profit From Fluctuating Exchange Rates
If someone invested in the dollar before COVID, they would most likely have made a profit now because the dollar strengthened against other currencies. They can also make short-term profits by buying the currency when it is doing well and selling it when the trend goes down. With trading apps, investors can buy and sell multiple times within a day; thus, maximizing their chances of making a profit.
Profit From the Changes in Interest Rates of Two Currencies
Two currencies could have the same value but different interest rates. In this case, you can exchange at a favorable rate and gain some money. However, Forex trading can be tricky. It depends a lot on luck, as well as an investor’s choices. Smart investors will always make decisions based upon market trends, use effective prediction methods and take into account various factors that come into play.
Unfortunately, there are always factors that are beyond a person’s control. The perfect example is COVID-19. It devastated economics, and even the strongest currencies depreciated suddenly, despite other predictions.
No matter how smart an investor’s decision may be, there are always risks associated with trading. If you want to invest, the best thing you can do is study the market strategies or opt for apps that do the work for you. Always follow market trends and remember, you’ll only get better with experience. If everything works out in your favor, you could end up making a lot of money.