Real-Time Forex Trading Definition

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Real-Time Forex Trading Definition

What Is Real-Time Forex Trading?

Real-time forex trading is a sort of financial speculation in which the speculator wagers on the movement of foreign currency exchange rates. Real-time forex traders often employ technical analysis tools to guide their selections. Because most real-time forex traders trade in periods of less than one day, real-time forex trading may be thought of as a sort of day trading.

Key Takeaways

  • The process of buying and selling currency pairs over extremely short durations is known as real-time FX trading.
  • This style of trading is supported by advanced computer systems and brokerage platforms.
  • Real-time forex traders must exercise caution to avoid having their potential gains wiped out by commissions, bid/ask spreads, and other costs levied by their broker.

How Real-Time Forex Trading Works

Real-time forex traders, as the name implies, are traders who purchase and sell currency pairs on the foreign exchange market. The name “real-time” alludes to the fact that this trading occurs in extremely short time intervals, with some transactions occurring in less than a few seconds. Real-time forex traders do this by using sophisticated computer programs and brokerage platforms to acquire real-time market information and execute deals at near-instantaneous speeds.

Those who want to try their hand at real-time forex trading should be informed that big losses are conceivable. Even with timely access to price quotations and trade executions, traders may incur larger-than-expected losses when markets respond unexpectedly to new occurrences. This is particularly true when trading currency pairings with limited liquidity. Prices may suddenly “gap” over or below their regular trading ranges in such conditions.

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Real-time forex traders depend on brokers that provide forex trading accounts while making deals. Various sorts of accounts are available, based on the magnitude of the trader’s transactions. Although most forex accounts enable trading in lots of 100,000 currency units, so-called “mini accounts” allow trades in lots of 10,000 units, and “micro accounts” allow trades in lots of 1,000 units. Brokers also vary in terms of commission and price structures, as well as the data and charts offered on their platforms.

Real World Example of Real-Time Forex Trading

Consider the figure below, which illustrates one minute of trading for the US dollar (USD) and Canadian dollar (CAD) currency pair. The chart generates a new “candlestick” every minute, representing the currency pair’s high, low, open, and closing values.

Image by Sabrina Jiang © Investopedia2021

The USD/CAD currency pair was more volatile in the early part of the day, progressively trading between the upper and lower boundaries delineated by the purple rectangles towards the conclusion of the day, according to this chart. A real-time forex trader using a similar chart may have attempted to purchase around the lower end of this range and sell minutes later when the price hit the higher bound. Other traders may use various techniques, such as attempting to predict and benefit from the more dramatic price swings witnessed earlier in the day.

Regardless of technique, all real-time forex traders must be cautious to ensure that their transactions are worthwhile after accounting for fees, bid/ask spreads, and other expenses involved with executing these trades.

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