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This also allows you access to leverage, which can increase your profits and your losses. When trading forex, you are speculating on the change in rates. You can buy or sell anything you see active on your trading station, even if you don't have any of that currency.

So, let's start with what a basic forex trade looks like If you want to take a broad opinion and invest in another country (or sell it short!), forex is an easy way to gain exposure while avoiding vagaries such as foreign securities laws and financial statements in other languages.

International exposure: As the world becomes more and more global, investors hunt for opportunities anywhere they can.

Leverage is a double-edged sword, of course, as it can significantly increase your losses as well as your gains. This can allow you to take advantage of even the smallest moves in the market.

Available leverage: Because of the deep liquidity available in the forex market, you can trade forex with considerable leverage (up to 400:1).

This makes it easier to get in to and out of trades at any time, even in large sizes.

Unmatched liquidity: Because forex is a $4 trillion a day market, with most trading concentrated in only a few currencies, there are always a lot of people trading.

The cost of entering a trade is the spread between the buy price and the sell price, which is always displayed on your trading screen.

Low Spread cost: Most forex accounts trade without a commission and there are no expensive exchange fees or data licenses.

This means there is no such thing as a "bear market" in forex–you can make (or lose) money any time. If you think a currency will go up, buy it. Go long or short: Unlike many other financial markets, where it can be difficult to sell short, there are no limitations on shorting currencies.Since there are no set exchange hours, it means that there is also something happening at almost any time of the day or night. You can, therefore, trade major currencies any time, 24 hours per day, 5 days a week. Forex never sleeps: Trading goes on all around the world during different countries' business hours.Online forex trading has become very popular in the past decade because it offers traders several advantages. So it remained solely in the hands of the big boys. The average person could buy a stock but couldn't trade currencies. Many have not heard of the forex market because the market has historically been largely exclusive to industry professionals. Since they do so in very large amounts, they record profits and losses in the millions every day for the smallest fraction-of-a-cent movements in exchange rates. Many of the world's giant banks, hedge funds, and insurance companies actively trade currencies as a way to make money. The $4 trillion forex market mostly runs on the same idea. You would have made $250 just because you held on to those euros and had bought and sold at the right time. Since you bought the euros for $0.90 and sold them for $1.40, you made a $0.50 profit per euro. In 2007, you took your euros to the bank and sold them for a 2007 price of $1.40. Say that you decided to hold on to 500 euros, and left them sitting in your desk drawer for 5 years. In 2002, one euro was worth about 90 US cents ($0.90).

At the end of a trip, you typically would change any extra euros back into US dollars. For the trip, you changed your US dollars into euros. Imagine that you took a trip from the United States to Europe in 2002. People trade currencies all the time, but how can currency be an investment? Here's a simple example.