Introduction to Forex Trading
The Foreign Exchange market (also referred to as the Forex or FX market) is the largest financial market in the world, with over $1.5 trillion changing hands every day.
Most people have heard of trading, like the New York Stock Exchange, and Forex trading isn’t far off from that. The difference is, is that Forex trading is the trading of currencies, not stocks. It also has a larger volume than stock and bond markets combined! As with stocks, it is a high-risk investment, but it can also have an extremely high return, easily doubling investments in minutes.
The best part about Forex trading, is that it is done using a margin. That is, you don’t need the full amount to buy a currency. A Forex trader can buy $100,000.00 with just $1,000.00. This allows traders to make huge profits with minimal investment. And the Forex market is open to all types of investors, not just big organizations, and banks.
Unlike other financial markets that operate at a centralized location (i.e. stock exchange), the worldwide Forex market has no central location. It is a global electronic network of banks, financial institutions and individual traders, all involved in the buying and selling of national currencies. Another major feature of the Forex market is that it operates 24 hours a day, corresponding to the opening and closing of financial centers in countries all across the world, starting each day in Sydney, then Tokyo, London and New York. At any time, in any location, there are buyers and sellers, making the Forex market the most liquid market in the world.
Traditionally, access to the Forex market has been made available only to banks and other large financial institutions. With advances in technology over the years, however, the Forex market is now available to everybody, from banks to money managers to individual traders trading retail accounts. The time to get involved in this exciting, global market has never been better than now. Open an account and become an active player in the largest market on the planet.
The Forex Market is very different than trading currencies on the futures market, and a lot easier, than trading stocks or commodities.
The best place for an investor to start when considering the Forex market, is the Forex community. Research is key to understanding Forex trading. Consulting Forex forums and community boards can be extremely beneficial.
The next thing to do would be to choose a system. A system, is a specially designed method, software, or course developed by professional in Forex trading. There are many systems out there, so research must be dome to make sure the system fits your needs. Before purchasing a system, you should ask them a few questions like, how long have they been in this business, and if there is a trial version available. Make sure that they have customer testimonials too.
By going to Forex forums, and chat rooms, one might be able to find out what system others are using, or what systems are recommended most. Most professional traders believe that having a trading system is an important factor in establishing a stable revenue in the forex market. Systems tell investors when, and what, should be done in each trading situation.
Another thing that an investor will need is a broker, to assist with transactions. There’s a wide variety of brokers, so be prepared with questions about their credentials. Ask them about their leverage, and their spread. As these are both determining factors in how much money the investor can make with each investment. The investor may also choose to handle transactions themselves.
An investor also needs to master analysis, and form a strategy, to get a competitive edge, and improve their odds. They need to learn to recognize the different factors that affect the Forex market. A person has a much better chance of success at trading forex, if they do their research, and know what to look for. And, in conclusion, it doesn’t matter if a person is experienced or a beginner in the world of Forex!
Risks in currency trading
Margined currency trading is an extremely risky form of investment and is only suitable for individuals and institutions capable of handling the potential losses it entails. An account with a broker allows you to trade foreign currencies on a highly leveraged basis (up to about 400 times your account equity). The funds in an account that is trading at maximum leverage may be completely lost if the position(s) held in the account experiences even a one percent swing in value. Given the possibility of losing one’s entire investment, speculation in the foreign exchange market should only be conducted with risk capital funds that, if lost, will not significantly affect the investor’s financial well-being.