Currency is a means of purchasing via trading. The currency market is a multi-trillion dollar market, making it the world’s largest market.
Currency trading is conducted through market makers and traders. Traders make trades through brokers, who in turn initiate matching trades on the interbank market.
There is a high amount of fluctuation in the currency market. This is driven by international speculation, economic and political factors. If the Euro-Zone countries import a large amount of good and services, they will need to trade Euros for Dollars in order to pay for this. This means Euros are being sold and Dollars are being bought. This will result in a higher demand and therefore a higher value of the Dollar.
The currency market is one of the most volatile markets, bringing with it many risks. The most effective way to trade currencies is through a viable risk plan or through risk management. This is very important because the currency market is very volatile.
Currency trading is conducted by various different retail traders/investors, different sized financial institutions, central banks and corporations. Retail investors who buy/sell currencies usually have little impact on the currency market. Banks and central banks in particular tend to move the currency market much more, as they buy/sell currencies in large quantities.
At a personal or retail level currency trading is often carried out through a forex broker. It can now be done via a options broker with the absence of leverage and minimum risks. The minimal costs of currency trading with a options broker make it an attractive proposition.