How Forex Market Puts Traders into Profits?

WikiFX Strategy (19 Jan.) - Forex trading is increasingly popular among investors for its easy operation and low risks. In this paper, WikiFX will explain how the forex market puts traders into profits from two aspects.

1. Risks of the forex market

In the international forex market, the daily volatility of the exchange rate could range from 0.5% to 1%. In the case of high trading volumes, the volatility could reach more than 5%. The market involves risks but also presents opportunities to earn high profits.

The risks, however, could be preset accordingly. For instance, one can set a stop loss before trading. Once you have lost the predetermined amount, the stop loss will trigger and automatically close your position.

2. Functions of the forex market

Hedging forex risks: Traders can enter into a forward exchange contract with the bank to avoid the losses that may incur due to currency fluctuations. Based on the contract time, traders could sell that currency forward to protect themselves from unexpected or adverse movements in the currencies' future spot rates.

Facilitating central banks intervention: In order to maintain the fixed exchange rates, central banks would control the volatile short-term capital flows by buying/selling the surging/plunging currencies, which is favorable for investors.

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