This week we focus on trading foreign exchange and the opportunities to trade it presents on the Tradefair Spreads platform.
Trading Forex
Foreign exchange is the biggest financial market in the world. Around $3 trillion worth of currencies change hands worldwide every day. That dwarfs the value of shares, government bonds and commodities that are traded daily. Particularly for major rates - like the dollar/euro - this usually means very liquid markets and very narrow differences between buying and selling prices.
Although forex is the biggest financial market of all, currencies are not bought and sold through central exchanges, like shares are. Instead, they are dealt through private electronic networks, made up mainly by big banks, brokers, companies and governments. And whereas stock markets are only open for a few hours each day, currencies trade around the clock.
With Tradefair Spreads’ spread betting service, you have access to seventeen different currencies, or 37 currency pairs in total. These are split into "major" pairs like the Euro/US dollar, "minor" pairs like Sterling/Swiss Franc, and "exotic" pairs like US dollar/Mexican Peso. Major pairs are generally tradable continuously from midnight Sunday night to 20.59 on Friday. Minor and exotic pairs can mostly be traded between 07.00 and 21.00 each day.
Economic forces have a lot of influence over what happens in foreign exchange markets. Faster growth and rising interest rates in one country can mean that its currency rises compared to another nation's currency. So, it's important to watch out for the announcement of sensitive economic figures, such as unemployment, trade data, inflation, and interest-rate decisions - see the calendar of economic releases at FT.com.
Even if you don't plan to trade currencies, you should be aware of the effects that forex movements can have on other markets. For example, falls in the dollar may be good for commodity prices, as the accompanying chart shows.
To find out how professionals approach forex trading, Beat the Forex Dealer by Agustin Silvani comes recommended.
Until next week, happy trading
The Tradefair Spreads Team
The above comments do not constitute investment advice and neither Tradefair Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
Risk Warning:
Spread bets carry a high level of risk so you should only speculate with money you can afford to lose. You can lose more than your initial deposit and stake. Before you open an account, please ensure that spread betting matches your investment objectives, familiarise yourself with the risks involved and if necessary seek independent advice.
Article provided / approved by Tradefair Spreads which is a trading name of London Capital Group Ltd which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 182110.
Tradefair® is part of the Betfair Group.
'Trading Foreign Exchange' edited by DB, updated 21-May-09
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Risk Warning:
Please note that spread betting and CFD trading carry a high level of risk to your capital. You can lose more than your initial deposit. These products may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
* Tax law is subject to change or may differ if you pay tax in a jurisdiction other than the UK.
