Online currency trading involves the buying and selling of currencies at the same time by the help of online currency trading platforms and high speed data transferring connections. Simply online currency traders trade currencies on internet for profit. They either place their orders directly to the market makers (direct access currency trading) or through online currency brokers (online currency trading). There are a variety of trading platforms, strategies and services available for online currency trading.
Online currency trading started in early 90’s with the popularization of computer and internet. The introduction of Broadband and other faster communication systems made online currency trading faster and easier, making even novice traders to trade with ease. Today there are a variety of forex trading platforms available, mostly free of cost, which provides latest market information in forms of tables, charts and alerts. These special encrypted softwares have made technical analysis and order entry semi or fully automated tasks, reducing mental pressure of currency traders.
As you may know, currency trading does not involve any centralized exchange. All trades are carried out over-the-counter, a trading mechanism that involves broker-dealer interaction and enables price negotiation. In online currency trading all orders placed to a market maker are executed by automated systems of market makers by comparing ask and bid prices available at a time. The currencies can be traded for short-term profit as in currency day trading or currency swing trading or for long-term profit as in currency position trading or investing. The strategy that one online trader follow depends on many things like his initial capital investment, ability to trade and manage risks, the broker he affiliated to, the currency pairs he trades, etc.
As with trading any other financial instruments, currency trading also involves risks. The currency market by virtue of its daily traded volume, global nature and high liquidity is regarded as the most stable market. The main factors which contribute to the changes in this stability involves changes in government policies, natural calamities, GDP growth of counties, international relationship changes, energy product price changes, nation’s exporting-importing ratio changes etc. In currency market as the exchange rate of one currency depends on that of the other, any change in exchange rate of one currency, especially Dollar and Euro, can trigger a chain reaction.
Online currency traders can trade mini and standard currency contracts. Mini forex contracts holds many advantages like low minimum account size, lesser investment, etc, which are more useful for novice traders to get experienced of currency trading. Online currency brokers also offer free currency trading accounts, called paper trading accounts, which includes the trading of currencies without any sort of investment. When selecting a currency trading broker, the key features to be noted includes the number and types of currency pairs offered, pip spread for currency pairs and leverage offered by the broker.