Financial institutions have been exchanging currencies for decades through the Foreign Exchange Market. Forex is short for the Foreign Exchange Market. Forex, or FX became a popular investment strategy for corporations during the 1970s. The Internet opened the door for all FX investors in the 1990s. Forex trading may sound complicated, but a proven strategy and a solid understanding of currency values is the key to being a success.
Over two trillion Forex dollars are traded daily, and a large number of those trades are done on the Internet by average investors. The first thing to learn is the forex market regulates itself. There’s no board of directors, and there’s no central location. It is one of the most liquid markets in the world. Trades are made twenty-four hours a day. Since the market never closes investors can respond to political, social and economic events in real time. That gives investors a great deal of flexibility.
The concept behind currency trading is simple
FX Trades are done in pairs. One currency is exchanged for another currency. A common pair is the United States Dollar and the Euro. In order to trade, the seller, known as a Forex Broker, states an asking price and a buyer makes a bid. The difference between those two factors is known as a spread. The spread is, usually, one or two-hundredths of a cent. Forex Brokers will, usually, add three to twenty pips, to the spread and that serves as their commission. The beauty of Forex trading is in the fact that there are very low margin requirements.
Since the Forex market is unregulated, the U.S. Securities and Exchange Commission recommends using a broker that has membership in the National Futures Association. That association is the industry’s self-regulating organization. A reputable broker will supply software, market quotes and Forex charts. All FX transaction are completed through electronic funds transfer. Mini accounts are available for beginners. Mini accounts can be opened for as little as twenty-five dollars. Mini accounts trade in micro-lots, so new investors can get a feel for the exchange market.
It’s all about buying and selling currencies when the price is right. Very similar to buying stocks at a low price and selling at a higher price. As a Forex Trader though, you have the advantage of choosing who you buy from, and use your knowledge on how the US Dollar affects the economy when making your choices. Another convenience is that you can do this 24/7 online if you prefer.
Signing up has never been easier
There are plenty of educational resources like videos and seminars offered online to learn from, and before you know it, you’ll be doing some real Forex trading. You may want to learn a little about market trends, and reducing risks. Learn to avoid costly mistakes, and consult with tax advisers about your investments.
- Foreign exchange trading offers an exciting way to earn some extra cash at your convenience. Forex brokers are there to offer their expertise in making the best choices if you choose to consult with them. The opportunities are endless and the choices are yours to make.
- As a new trader mistakes will be made, but with time, new traders learn to analyze, and observe patterns in the market that clearly point out Profit! This process is acquired after time, practice, and observation. New traders need to be patient and learn the process. The two biggest mistakes is making a wrong investment…and losing money! Follow the process and stay focused on a plan. Your trading results will tell how effectively you are learning to trade or if changes and advice are needed.
- Once you grasp the edge of trading proficiently, you’ll be on your way to real trading. New strategies will come into play just like playing a game, and learning the pros and cons of risk taking. Read up on market trends, and stay on top of how the economy affects different markets. Stay connected with the media, market moves in different directions and can be confusing know that the Forex market is volatile.
- Stay focused and informed at all times, especially with big news that sway the market. Events can change strategies and plans, increasing the cost of trading, and a quick adjustment may be necessary. Forex trading is an opportunity waiting for you before you know it, you’ll be cashing in on your investments!
Insure Your Forex Trades With Stop Loss
There are many risks when it comes to any sort of trading. This is just as true with the trade of currency through avenues such as Forex. Forex is a place in which people can make a lot of money. It is a great place to also put things into place where a person does not lose too much of their money or holdings, by the end of any particular trading period. This itself is called the stop loss, which is where a person can cut their losses, depending upon their trading session, and the amount of their holdings in which they have already lost. This is a great method so that no one goes far to much in the opposite direction, keep the trader in control of their finances at all times, in many different ways.
This is a feature in which most people should use, given that there is a lot of volatility that is involved with any sort of trading, whether it be stocks and or commodities. It is important to put certain things such as stop loss into play, so that a person, even when losing on their shares, can keep a lot of the control still within their hands. This is a method that not only is used by those who are new to the currency, or any other sort of trading. Stop loss is also used by a lot of veterans that trade a lot in the market, keeping their holdings in check as much as possible.