Everything to Know About Buying and Selling Currency

Everything to Know About Buying and Selling CurrencyCurrency trading has exploded in popularity over the past few years, with more and more beginner and seasoned investors turning to forex. It is also fairly easy to learn, making it more attractive to inexperienced investors.

Here at OANDA, we want to help you on your forex journey. This guide will teach you what currency is and the basics for getting started.

What is Forex?

Currency trading is known as forex, or foreign exchange. In simple terms, it is the buying and selling of currency, where profits are made with the rise and fall of exchange rates. Currencies are paired up, with the majority of forex markets offering all major currencies across the globe.

As a very simple example, let’s assume you have $10. You find a pairing you like, Dollars and Pounds, and you buy Pounds with your $10. The exchange rate means you might get £8 for your $10.

You then wait for the Pound to strengthen and then sell your Pounds back for Dollars. You make a profit by selling your Pounds back for more than you bought them for, and you finish with more Dollars than you started with, the currency you want. This is a very, very simple example, but it is the gist of what you are trying to achieve.

Trading Pairs

There are around 70 different trading pairs to choose from when buying and selling currency. Forex differs from buying stock as stocks are not paired with anything, you purchase them, and then their value is determined by the value of the company. You can also only buy and sell stocks in one currency.

Trading pairs allow you to buy and sell a variety of currencies, in particular the biggest ones like the Euro, Pound, and Dollar.

forex differs from buying stock

Pros of Trading Forex

There are multiple pros to trading forex, and it doesn’t matter if you are a long-term investor or just starting. What is very appealing to new traders is that you don’t need a huge budget to start, and you can go as big or as small as you want.

Liquidity

A massive plus when trading currency is how liquid it is. What this means is that there is so much currency being bought and sold every day that it is very easy to enter and leave a position almost whenever you want.

The same thing can’t be said about stocks, which is why new traders or those with smaller budgets like forex. You can start small, buy and trade a bit, and then leave with a small profit. The risk is minimal, and you still have a good chance of making a profit.

Trading Hours

While stock markets are open for quite a lot of the day, forex markets never close. There are offices and markets across the globe, letting you buy and sell whenever you choose. There is no need to wait for the bell to ring to begin your trades.

This gives you much more control over when you want to get in and when you want to get out again, as you can decide. Stock markets tie you into certain times, which can sometimes be detrimental to your investment if you can’t get out when you want to.

You Can Start Small

With the use of leverage and the ever-changing exchange rates, you can start your forex journey with very little money. You can start as small as having enough of one currency to buy one unit of another currency and then trade back again.

This makes it exponentially more appealing to new investors who are often wary of investing large sums of money into a brand new investment. You can start small and “practice” before deciding if you want to invest more or not. Forex is also great for diversifying your portfolio, and the small investment allows you to see how it affects your portfolio.

start your forex journey with very little money

Before You Begin

Before you begin your forex trading journey, it is important to fully understand how the markets work and how you can make money. There are numerous courses and videos available to help you on your journey.

Trading forex also requires time; as mentioned, exchange rates are changing minute by minute almost, meaning your investment is changing just as quickly. Trading forex is not something you can buy and then forget about; you need to be able to commit the time.

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