Currency trading is simply buying and selling currency for profit, and is centred on the foreign exchange market, known as ‘Forex’. When considering whether to buy or sell currency, skilful traders pay attention to world affairs, noting levels of inflation, how industrial production is faring and what is happening in the political arena, especially concerning international relations that are influenced by geographical factors. This is because exchange rates will rise and fall in response to such events.
As the currency exchange rate is normally quoted in pairs, it is common to see these described as, for example, GBP/USD – the British pound sterling against the US Dollar – and the rate quoted, say 1.56, is an indicator of the number of US Dollars that can be bought with one pound sterling. The aim is to buy a currency at a particular rate, and then sell it again when the exchange rate has risen, thus making a profit.
More and more people are keen to learn forex because it is relatively accessible and it is not necessary to have lots of money to begin trading.