Introduction to Forex Trading for New Traders

Introduction to Forex Trading for New Traders

by Rebecca Hall on 20 Mar, 2012

Forex trading is the act of simultaneously buying a currency while selling another with the aim to make a profit. Currency values rise and fall against one another based on numerous factors. As one of the world’s most traded markets, forex has an average turnover in excess of US$4 trillion per day compared to the New York Stock Exchange – whose turnover approximates to US$50 billion per day. So, why choose to trade forex?

If you are a new trader or even an experienced one, you will be first be looking at the key features of trading forex.

As a trader, you want to know the best possible way to net a profit from your portfolio. With this in mind, a significant attraction for many traders is that the forex market is one of the most liquid; meaning tighter spreads throughout most of the day.

An over-the-counter (OCO) market, forex trading – referred to as foreign exchange, retail forex or simply FX – offers traders the ability to trade 24-hours a day; opening from Monday morning in Wellington, New Zealand; progressing to Asia, then London; before it closes on Friday night in New York.

With City Index, traders wanting an edge in the forex market can take advantage of capped variable spreads, which offer a competitive spread advantage over retail forex traders elsewhere.

Forex Spreads
By choosing to trade forex through a City Index forex trading account you have the advantage of gaining exposure to tighter forex spreads during periods of high market liquidity, whilst also trading tight spreads during periods of low liquidity.

As an example, consider retail forex trader A. With their City Index forex trading account, they are trading at spreads around 5 pips/points during periods of low liquidity.

This is the cap set by City Index, even though the underlying spread may be wider.

Alternatively, trader B – who does not trade with City Index – they are trading at spreads of 8 pips/points or higher.

This shows how retail forex trader A, trading with City Index, has the advantage in the forex marketplace.
In addition, where spreads have the potential to widen excessively, the City Index forex spreads will remain between fixed capped levels.

Conclusion

Forex trading with City Index offers a range of benefits from tighter spreads, to the downloadable Advantage Trader and browser-based Advantage Web trading platforms, designed with professional traders in mind to help improve their trading success.

Be mindful that trading on margin carries high levels of risk. The possibility exists that you could lose some or all of your investments, including your initial deposits, making retail forex unsuitable for some investors.

About the Author

Rebecca Hall


Rebecca Hall worked as an independent mortgage adviser for 10 years before turning to financial journalism full time. She has strong links to the CAB advising families on mortgage refinancing.