In the last 15 years, Forex trading has become one of the fastest growing activities among private investors. As per a research conducted by Citi in 2014, online currency trading numbers stood at 4 million. In that, retail Forex trader section was responsible for 20% of daily turnover in the global forex market.
So, let’s take a look at the concepts to get a better understanding.
What Is Retail Forex Trading?
It is speculation on the price of one currency against another. Individuals log in to an online platform, deposit cash and bet on the changes in currencies.
Similar to a bookmaker, a broker acts as a counterparty to bets.
The clients are leveraged by brokers, allowing them to borrow more than the deposited cash. The brokers usually offer leverage of 50-200 times the amount deposited.
For example, a broker offers the client 50 times the cash deposited. Therefore, a deposit of $1000 will permit trades of up to $50,000.
How Can a Retail Forex Trader Manage Risk?
The broker usually offers risk management mechanism called ‘automatic stop-loss,’ which closes trade at a price stated by the trader. However, the best way to manage risk is to calculate the odds of being successful. To do that, a trader should have a grasp of both fundamental and technical analysis. He or she must have an understanding of the dynamics of the market which they are aiming for.
They should be aware of the expected psychological price trigger points based on trading charts.
Benefits of Trading in Retail Forex:
Market is accessible 24 hours a day – Retail forex market operates continuously, due to its geographical distribution between markets worldwide. However, it’s not available during weekends.
Free from Commission – There is no commission involved in forex. Retail forex traders pay the spread required, which can be as low as two units to 4 decimal places.
The market is recession proof – Forex market permits Profitable trades irrespective of bull or bear market. The market allows one to both buy and sell currencies depending on the market situation.
Total Control – A fundamental advantage of forex trading is that traders have complete control in respect of making a trade. Retail forex traders always have the final say in whether to make a trade or how much capital to risk.
Cost is reasonable – Forex trading gives a lot of low cost investing options compared to other means of investment. It’s reasonable compared to different markets as dealers are directly involved in covering the risk.
Highly Profitable – It provides maximum leverage compared all other financial investing market. This gives traders an added advantage to be more profitable.
Retail brokerage houses have made forex trading affordable and accessible to everyone. Beginners can start out using a demo account to practice. Once confident, they can invest capital to become a professional retail forex trader. So start trading today to become financially independent.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.