How to Trade Currencies in Trading Apps
Forex trading, also known as FX trading is the trading of currencies to make a profit. Today, it is one of the most profitable trading platforms and is mostly carried out through trusted trading apps.
What is forex trading?
Forex trading, which stands for foreign exchange trading, refers to the buying and selling of currencies by converting one currency into another, with the aim of earning a profit in the process. As one of the most actively traded markets worldwide, the forex market has an average daily trading volume of a whopping $5 trillion.
The foreign exchange market can be described as a large, global network of buyers and sellers who exchange currency amongst each other at an agreed price. These buyers and sellers may include banks, central banks, companies, and individual traders. If you have traveled abroad, then it means you have made a forex transaction.
The forex market is a global, over the counter (OTC) market where investors and banks come together to exchange currencies. The trading of currencies in forex trading takes place over what is referred to as the “interbank market”, which is an online channel over which currencies are traded 24 hours a day for five days a week.
Base currency and a quote currency
Forex trading involves the simultaneous buying and selling of two currencies, known as currency pairs. Under currency pairs, you have base currency and a quote currency. The base currency is the first currency that is listed in a forex pair and the quote currency is the second currency listed.
Since forex trading is the process of selling one currency so that you can buy another, it is always quoted in pairs. As such, the price of a forex pair is equal to how much one unit of the base currency is worth in the quote currency.
For example, if you are trading US dollars with the Euro, you will see it as EUR/USD. Each currency in a forex pair is listed using a three-letter code. This code is usually formed of two letters that stand for the region, while the other one remaining letter stands for the currency itself.
Forex pairs are split into the following categories:
- Major pairs
These are a total of seven currencies that constitute a massive 80 percent of global forex trading. They are EUR/USD, USD/JPY, USD/CHF, GBP/USD, AUD/USD, and USD/CAD.
- Minor pairs
These are forex pairs which are traded less often, but still feature major currencies in the world apart from the US dollar (USD). These include EUR/CHF, EUR/GBP, and GBP/JPY.
- Exotic pairs
Exotic pairs refer to a major currency pairing against a currency from a small or emerging economy. These include USD/PLN (Polish Zloty), EUR/CZK, and GBP/MXN (Mexican Peso).
- Regional pairs
Finally, a regional pair in forex trading refers to currency pairs that are classified by region. These include EUR/NOK (Norwegian Krona), AUD/SGD (Singapore Dollar) and AUD/NZD (New Zealand Dollar).
Just like the stock market, the forex trading market is moved by many factors that drive price fluctuations. These include news reports and current events, central banks, economic data, credit ratings, and market sentiment. Exchange rate can be unpredictable and volatile and impacted heavily by these factors.
Brokers trading platforms Vs. Banks
Brokers trading platform refers to a software that is used for the trading of foreign currencies. A forex broker simply refers to a service firm that enables their clients to buy and sell foreign currencies using a special software and this software is known as a brokers trading platform.
Forex brokers are also referred to as currency trading brokers or retail forex brokers. Today, if you wish to trade foreign currencies, all you have to do is open a forex trading account with a broker, which can all be done online.
Brokers trading platforms are not the same as banks. While banks are financial institutions that receive deposits and provide loans, brokers trading platforms are meant solely for the trading of foreign currencies. Generally, most big banks have forex trading platforms under them.
Main features on trading apps
If you wish to start forex trading today, using a trusted trading app is of utmost importance. The platform you use can make a huge difference in your profits and your overall trading experience. Here are some of the main features that a good trading app should have.
- Watch lists
- Market news
- Stock filters/screeners
- Stock alerts
- Account notifications and calendar
- Portfolios with sortable data
- Real-time streaming of charts and quotes
- Money transferring
To make the most out of your forex trading, make sure you use a trading app that offers all these features and excellent client service. When it comes to finance, you should never settle for anything that is not up to your standards.