Also known as “Foreign Exchange”, Forex is considered as the trading of currencies from various countries against each other. There are many different currency pairs that can be traded in Forex trading. Some of the most popular ones are EUR/USD, GBP/USD, USD/JPY, AUD/USD, and USD/CHF.
In Forex trading, the goal of making the exchange is to hold it until the value increases or decreases and then exchange it back in order to achieve the desired profit. Forex trading is considered as a very popular form of investment thanks to the so called “leverage” that’s offered to traders, which can range anywhere from 20:1 to 400:1.
Intro to CFD
Invented back in the early 1990’s, CFDs were created for the purpose of hedging funds and for the actual practice of institutional investors. However, they had spread throughout the late 1990’s also to retail traders. The basic concept of CFDs is based on the principle that presents an agreement (contract) between two parties, (one being the client, while the other being the broker) to exchange the difference between the opening and closing price of the agreement.
In any event, when trading CFDs, the trader never really owns the underlying asset, what makes it extremely attractive as an investment instrument to both traders and investors alike. Because CFDs are being traded on margin, they tend to provide a quick, easy, simple and convenient way to acquire a relatively “low-cost” entrance into a wide-range of financial markets.