Forex (FX) is a portmanteau of the words foreign [currency] and exchange. Foreign exchange is the process of changing one currency into another for various reasons, usually for commerce, trading, or tourism. According to a 2022 triennial report from the Bank for International Settlements (a global bank for national central banks), the daily global volume for forex trading reached $7.5 trillion in 2022.
Cryptocurrency trading is the act of speculating on cryptocurrency price movements via a CFD trading account, or buying and selling the underlying coins via an exchange.
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CFD trading on cryptocurrencies
CFDs trading are derivatives, which enable you to speculate on cryptocurrency price movements without taking ownership of the underlying coins. You can go long (‘buy’) if you think a cryptocurrency will rise in value, or short (‘sell’) if you think it will fall.Trading Courses All Free Courses Download
Both are leveraged products, meaning you only need to put up a small deposit – known as margin – to gain full exposure to the underlying market. Your profit or loss are still calculated according to the full size of your position, so leverage will magnify both profits and losses.
Buying and selling cryptocurrencies via an exchange
When you buy cryptocurrencies via an exchange, you purchase the coins themselves. You’ll need to create an exchange account, put up the full value of the asset to open a position, and store the cryptocurrency tokens in your own wallet until you’re ready to sell.
Exchanges bring their own steep learning curve as you’ll need to get to grips with the technology involved and learn how to make sense of the data. Many exchanges also have limits on how much you can deposit, while accounts can be very expensive to maintain.
KEY TAKEAWAYS
- The foreign exchange (forex or FX) market is a global marketplace for exchanging national currencies.
- Because of the worldwide reach of trade, commerce, and finance, forex markets tend to be the world’s largest and most liquid asset markets. Trading Courses All Free Courses Download
- Currencies trade against each other as exchange rate pairs. For example, EUR/USD is a currency pair for trading the euro against the U.S. dollar.
- Forex markets exist as spot (cash) and derivatives markets, offering forwards, futures, options, and currency swaps.
- Some market participants use forex to hedge against international currency and interest rate risk, speculate on geopolitical events, and diversify portfolios, among other reasons. Trading Courses All Free Courses Download
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Similar Course: Anton Kriel – Professional Forex Trading Masterclass