Retail foreign exchange trading is a small segment of the larger foreign exchange market where individuals speculate on the exchange rate between different currencies. This segment has developed with the advent of dedicated electronic trading platforms and the internet, which allows individuals to access the global currency markets. Due to easily available high speed interned forex trading, for speculation purposes, is becoming significantly more and more popular to the retail crowd.
Traders are moving to forex in astonishing numbers, it is the online trading which is booming its popularity globally. The traditional stock and other markets are abandoning and forex traders are increasing. The forex market is the largest market in the world. It is the market where currencies are traded. Each day trillions of dollars are exchanged. Factors like liquidity, interbank market, and the sheer size of the currency market are relevant for the institutional business and it has a significant meaning for the retail trader.
There are many participants in the forex market including banks, commercial companies, central banks, investment management firms, hedge funds, retail forex brokers and individual traders. Until the late 90's it was difficult for retail traders to speculate in the forex markets. Minimum investments were typically as high as $10 million. Through the development of retail forex brokers and the internet retail spot forex now makes up over 10% of the forex market. You can trade forex online for speculation purposes with as little as $100 in your account from your home computer.
The forex market has no restrictions for directional trading. This means that if you think a currency pair is going to increase in value, you can buy it or go long. Similarly, if you think it could decrease in value, you can sell it or go short. Increased leverage allows retailers to control a large holding of currencies with very little money up front. For instance, if you had 100:1 leverage, you could control $100,000 in the currency market with as little as $1,000 in your own account. That means you get to realize all of the profits on a $100,000 position while only risking a small amount of your own money.
Trading conditions are vital for professional traders. Spreads and commissions on this market are quite low, making this an attractive market to trade. In fact, quite often, it is possible to experience only one or two pips spread on this market. Next, to the spreads, the forex infrastructure is well-developed, meaning that execution of trades is much smoother and simpler. Trading forex is an exciting, interesting, and educational process. Not only does it give you an opportunity to make trades online, but it also educates you on worldwide events.