What you need to know about Forex trading

The foreign exchange market is largely made up of institutional investors, corporates, governments, banks, as well as currency speculators.

Unlike the stock market and future markets that are housed in central physical exchanges, the foreign exchange market is an over the counter market, decentralised market completely housed electronically.

Though investors are familiar with the stock market, they are unaware how small it is in comparison to the forex market that is the largest financial market in the world open 24 hours a day, five and a half days a week.

There are many benefits and advantages of trading forex. Nevertheless, key among them is that there is no waiting for the opening bell.

From Sunday evening 8.30pm GMT to Friday Evening 9pm GMT, the forex market never sleeps.

This is awesome for those who want to trade on a part-time basis because you can choose when you want to trade: morning, noon, night, during breakfast, or in your sleep.

Because the forex market is large, it is also extremely liquid.

This is an advantage because it means that under normal market conditions, with a click of a mouse you can instantly buy and sell at will as there will usually be someone in the market willing to take the other side of your trade.

You are never ‘stuck’ in a trade.

You can even set your online trading platform to automatically close your position once your desired profit level (a limit order) has been reached, and/or close a trade if a trade is going against you (a stop loss order).

You would think that getting started as a currency trader would cost a ton of money. However, when compared to trading stocks, options or futures, it doesn’t.

Online forex brokers offer mini and micro trading accounts, some with a minimum account deposit of Sh2,500.

We’re not saying you should open an account with the bare minimum, but it does make forex trading much more accessible to the average individual who doesn’t have a lot of start-up trading capital.