The forex (FX) market (is the one in which trading occurs only through currencies) is a huge market. It is one of the important liquid markets in the world. It is defined as a market in which is trading is performed with the desirable amount of money with inclusion of many buyers and sellers. In this market, huge amount of money is transacted every day. It is operated 24 hours a day and all the 7 days of the week all over the world. It is traded worldwide which means that the market is an electronic market with the network of banks, traders, brokers, investors, institutions and the like. With the growth of trading market, crypto currencies like bitcoin, altcoin, and the like also emerges into the scene of trading. In today’s era of currency trading, some forex brokers have started accepting crypto currencies.
Trading of Forex
Consider an American trader betting on the British pound/U.S dollar currency pair which is GBP/USD. The trader first deposits $100 with the guidance of the forex broker. Presuming the rate of $1 = £0.5, the trader will yield £50 for the deposited amount of $100. In the meanwhile, if the rate of GBP/USD changes to 0.45, then the trader will yield 11.11% profit for the deposited amount. This trading is a sample of for normal cash trading. Consider a bitcoin trader who has decided to trade using the crypto currencies. This involves the selection of a broker who accepts crypto currencies like altcoins, AvaTrade, eToro, LiteForex and the like. The trader then deposits some amount, say 2 BTC from the digital wallet (transfer of amount through technology without taking the cash from the wallet) to the broker’s digital wallet. Consider the trader has determined to bet crypto currency to U.S dollar. Presuming the rate of 1BTC = $500, then the deposited value of crypto currency yields $1000. It is then assumed that the betting is done against British pounds. For the exchange rate of £0.5 = $1, £500 will be obtained. In the course of time, the rate of GBP/USD gets modified to 0.45, and as a result of this, $1111.11 is yielded to the trading account. Now returning back to crypto currency to U.S dollar, consider the rate have dropped to 1 BTC = $560. So, finally in the conclusion part, the trader’s crypto currency value will be 1.984 BTC with a small amount of value. This scenario will also end up resulting in profit depending upon the currency values.