Forex (Foreign Exchange) is an extremely large market. In fact, it’s the world’s biggest financial market with more than $5 trillion in transactions every day. It is open for business 24 hours a day, 5 days a week and its enormous volume is matched by its volatility. Prices can change in microseconds.
Although the price changes or movements are frequent, they are usually very small and are measured in pips. One pip = 0.0001 and so a large amount of capital is needed to register significant profit.
To overcome this disadvantage, many brokers offer what is called leveraging. This enables traders to control a far greater quantity of the underlying currency than their capital might suggest. Where a leveraging ratio of 1:50 is offered, the system effectively lends the trader $49 for every $1 he or she invests. Profits are magnified accordingly but so are any losses.
The value (price) of every currency can be impacted by numerous factors. They are mostly economic or political - such as interest rate changes by a central bank, and inflation or employment figures – but a natural disaster could also cause a price fluctuation.
At Metadoro traders do not have to actually purchase assets such as currencies or stocks. Instead, CFDs enable trading in price fluctuations of underlying assets. CFDs also enable both buying (going long) and selling (going short) for trading assets such as stocks and others that do not permit selling short in conventional markets.