What is a Forex Broker? Foreign exchange trading explained simply

 

Not only shares can be traded on a market by buying and selling, but also currencies. When it comes to trading currencies, this is called foreign exchange trading. The daily turnover of around 5 trillion dollars worldwide alone shows how important foreign exchange trading has become. The most important currencies traded in foreign exchange are the euro, the US dollar, the British pound, the Japanese yen and finally the Swiss franc. Of course, the range of currencies on the foreign exchange market is much wider.

Small investors can also trade

If you are interested in currencies and the associated foreign exchange trading with a Forex broker, you can also get involved as a small investor. However, the term “small investor” is not really correct. Unlike shares with a share deposit, you don’t acquire anything with foreign exchange trading. You don’t get any shares and the associated rights as a shareholder. Nor do you get the money when you trade in foreign exchange. Rather, the trade and the associated values take place exclusively electronically. When it comes to foreign exchange trading, one usually bets capital on price changes. Not only are there daily changes in company shares on the stock exchanges, but also in currencies. The dollar or the euro can rise or fall. This is not insignificant for the economy, since values are at stake here. And especially in foreign exchange trading, you bet money on these price fluctuations. If you are right in your assessment of the price development, you will receive a corresponding profit, depending on the leverage applied. Ultimately, one can also say that foreign exchange trading is about nothing more than betting on price changes. Mostly, it is only a matter of short-term bets of a few minutes or hours. Accordingly, foreign exchange trading is usually time-consuming for a small investor. You have to be aware of this when you start trading in foreign exchange.

You need a Forex Broker

If you want to get into foreign exchange trading as a small investor, you need an appropriate broker. You can place your bets via a forex broker, the entire process takes place via the broker. In connection with a Forex broker, it is important to know that there is no one Forex broker. Rather, there is a wide range of offers and the associated differences. These differences can be noticeable not only in what currencies one has access to in the context of foreign exchange trading. There are also differences in other respects, namely when it comes to fees. After all, the stakes of the capital are not free of charge. Precisely because of the differences in performance and fees, you should take a close look at the Forex brokers and also compare them here. An important point here is also the leverage that is applied. This should of course be as high as possible so that it is also worthwhile in terms of profit. Through a comparison, small investors can save on fees and get the best possible functions and services from a Forex broker.

You have to be aware of the risks

In connection with forex trading, small investors must be aware that there are risks involved. Since in principle it is nothing more than betting on price changes, one can be wrong in one’s assessments. And depending on the extent to which capital is invested, this can be associated with a total loss. And it is precisely this risk that one must be aware of if one wants to enter into foreign exchange trading via a Forex broker. On the other hand, you should always see the opportunities when trading foreign exchange via a Forex broker, especially with regard to the possible profit that can be associated with it. Ultimately, one should only enter into foreign exchange trading if one has good knowledge and up-to-date information on the economy and politics. Both are ultimately decisive for the changes in the prices of currencies in foreign exchange trading.

---

You may be interested in: Become a Successful Forex Trader