Until recently, the Forex market was a closed market and trading activities were confined to the “big boys” like the banking sector, the multinationals, and the hedge funds. However, with new technological advancement, small retail investors now have the opportunity to participate in this lucrative market as well as online Forex trading.
So what is online Forex trading? Essentially online Forex trading is the trading of one currency for another through the use of the internet. The Forex market is actually the largest financial market in the world and it is an over the counter (OTC) market.
This means that there is no centralized location like the New York Stock Exchange from which trading activities must take place. Because of this unique aspect of the Forex market, with online Forex trading, one can deal with Forex from any place in the world. In addition, with online Forex trading, it is possible to trade in Forex around the clock five days in a week without having to leave the house.
Read More: Online Forex Trading Signals
Online Forex trading differs very much from the traditional method of transacting financial instruments in the sense that most trading activities are more or less self-service. With a properly equipped computer and internet access, a trader will be able to basically determine what to buy, when to buy and how much to buy with just a click of the mouse. In addition, the speed with which your orders are executed is almost instantaneous as you will be using a trading platform that is provided by the Forex brokerage firm.
Apart from the above mentioned, there are also several other advantages with online Forex trading as compared to the traditional brick and mortar way of trading Forex. One of these other advantages is the lower transaction cost that you will incur with your online Forex trading. As online Forex trading is self-determined by the trader himself, the brokerage firm will be able to do away with other higher-cost services and just concentrate on a “volume-based” business strategy by lowering their cost to attract more business.
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And to help their clients determine what a good buy is charting tools are usually provided on the online trading platform for those who engage in online Forex trading. Once the analysis of the Forex market is completed with the charting tools, an online Forex trader will also be able to program his market analysis into the trading platform and automate his transaction activities. It is for these few reasons that online Forex trading is now gaining popularity over the rest of the financial activities that retail traders previously usually went for.
What is a pip in forex?
Pips are the units used to measure movement in a forex pair. A forex pip is usually equivalent to a one-digit movement in the fourth decimal place of a currency pair. So, if GBP/USD moves from $1.35361 to $1.35371, then it has moved a single pip. The decimal places are shown after the pip are called fractional pips, or sometimes pipettes.
Online Forex Trading Systems
The most important part of a trading system is the stick to the rules and criteria that you put in place. There is no point in spending time and effort creating your system, to then be caught up in the moment and forget everything that you have planned.
Forex Trading Signals
Forex trading signals is defined as an analysis or hypothesis that a trader uses to determine whether he should buy or sell a particular currency pair at any given time. These Forex trading signals can either be derived from studying technical analysis or fundamental analysis or conclusions drawn after studying the currency pair based on both methods of analysis. As such, Forex trading signals comprises of a bunch of signals that work in synchronization with each other to produce the actual buy or sell signal.
The actual process of determining these Forex trading signals can be developed by the traders themselves or provided for free by their brokerage firms or a paid professional service which the traders subscribe to for the Forex trading signals.