Currency trading is famous for being highly profitable and highly risky at once. Many have made their fortunes through currency trading and an equal number have lost their fortunes doing it. With all the ups and downs and complexities involved in Currency trading it still remains a favorite with people who swear by Forex. Though it’s easier said than done– the trick to currency trading lies in getting a full picture of the market situation and then leveraging gut feeling, honed over years, to close in on a profit. The skill is often described as a perfect mix of in depth knowledge sharpened by strong judgment.
What is currency trading?
Though the concept is complex and involves a mind-boggling range of variables, for easy understanding, it can be defined as trading in currency, that fluctuates, and making profits by selling or buying during these fluctuations. Currency Trading also goes by the name of Forex trading. To trade in foreign currency one needs to open a Currency Trading account or a Forex account, by depositing a certain sum ( typically S$ 3000 in Singapore) that allows you to trade in the currency market.
Before going in for a full-fledged real time Currency trading account it is advisable to try ones hand on a Demo account; it will expose you to real time situations without much at stake.
How does it work?
Currency trading is based on making intelligent and informed guesses that a certain currency’s value will either appreciate or fall. Trading is done in pairs. Let’s look at an example to understand what the pair is and how a trader stands to gain or lose.
A currency quote that goes something like this SGD: USD, is a pairing of the Singapore dollar and the US dollar, where the base currency is the SGD and the quote currency is the US dollar. The base currency is considered as one unit and the quoted currency value is what can be bought with one unit of the base currency. If the value of the quoted currency goes up, the trader stands to gain and if the value of the base currency goes down the trader stands to gain, because of the margins created in both the cases.
To understand what will go up( also what will go down) and when, the trader has to have a through idea of the market conditions and keep a constant watch over the fluctuations. This fundamentally is how one makes money, trading, through a currency trading account.
OCBC, Citibank Singapore, Maybank, UOB etc are few well known names that offer Currency Trading accounts in Singapore. One can either fill up an online form to open an account or get it done through snail mail. Most bank’s offer step by step instructions on how to open a Currency Trading account in addition to support via telephone. It is advisable to go through a few banks and institutions before settling for one.