The foreign exchange (forex) market is the largest financial market in the
world. This is where fiat currencies are publicly traded like the US Dollar and
the Japanese Yen with an average value of $4 trillion being traded daily.
Forex trading has become a popular choice among retail speculators and traders for a number of reasons. The forex market is open 24 hours a day, 5 days a week, and you can trade it with a relatively small amount of capital. It's also extremely liquid, allowing traders to utilise a range of different strategies including day trading, swing trading and longer-term investing.
The new digital currency
There's a new type of currency on the scene that has some different qualities to government-backed currencies and it's creating a bit of a buzz. This is, of course, cryptocurrencies... Cryptocurrencies, also known as digital currencies, trade independent of the foreign exchange market on their own cryptocurrency exchanges but are, however, becoming increasingly available to traders through online forex brokers, CFD providers and spreadbetting firms. Digital currencies are decentralised currencies operating free from the control of any single institution and use encryption techniques to regulate the generation of units.
The cryptocurrency market is booming and extremely volatile, drawing in professional and amateur traders as well as people who are completely new to trading or investing. Bitcoin is the most popular and leading cryptocurrency and has increased in value by more than 350% this year alone and many thousands of percent since its inception in 2009.
The creator of Bitcoin, Satoshi Nakamoto, designed the currency along with his collaborators with the intention of liberating money in a similar way to how the Internet has liberated the transfer of information.
Bitcoin utilises some impressive technology and offers its users some real benefits including lower transaction fees especially on international transfers, as well as greater privacy and simplicity as the currency is sent directly from person to person without the need for a bank or personal details.
The combination of cryptocurrencies' massive potential, innovative technology and the buzz surrounding them is what's driving this extremely fast-moving and volatile market.
Bitcoins and other cryptocurrencies can also be bought and traded directly on their cryptocurrency exchanges, however, this is not always a straightforward process and time will need to be spent learning about the crypto exchanges and how they work. For example, you will need to set up a Bitcoin wallet and some exchanges do not accept base currencies like the US dollar or British Pound, making funding your account a lengthy ordeal. Cryptocurrency exchanges are also unregulated so there are risks involved with that.
However, many fully regulated trading brokers are now embracing
cryptocurrencies and providing ways for their customers to trade them without
the complexities of getting set up on a cryptocurrency exchange. Some online
brokers are for example offering Bitcoin products in the form of CFDs and
spread betting. This gives traders the opportunity to trade them both long and
short, get access to leverage and use the professional trading platforms they