Why do currency values change in Forex trading?

Currency values can change for many reasons. Sometimes they react to external political and economic news, such as Great Britain’s proposed exit from the European Union. At other times, value changes are driven by trading in the market itself. Often, both external and internal events drive currency value changes on the Forex.

When, for example, the U.S. Dollar is strong, companies in the United States may increase their purchases of European products, which have become correspondingly less expensive. To pay for these products, they exchange US Dollars for Euros. When large quantities of dollars are exchanged for Euros over a short time period, the demand for Euros increases.

Consequently the value of the Euro increases and the value of the US Dollar decreases.

Is Forex trading risky?

Currency trading is typically highly leveraged. Moreover, the Forex is lightly regulated. Spot trades aren’t regulated at all. Both factors increase the risk of Forex trading. The real key to success with currency trading is to trade conservatively, while employing some means risk management.

Almost all novice traders should begin trading on a practice trading platform that allows them to make hypothetical trades without risking their investment capital. When and if they see positive results, they can begin trading on the Forex itself.