quinta-feira, 21 de fevereiro de 2008

What is Forex Trading and is it for me?

Forex trading is the leading economic marketplace on the planet exceeding $2 Trillion daily and can be an exceptionally rewarding, yet unpredictable and perilous marketplace. Trading is not only accessible to major investors but less significant dealings, called mini lots are offered to let smaller traders have a go at trading. The word Forex comes from joining the words, foreign and exchange.

Forex trading is trading actual currencies at today's exchange rate with banks and is speculative, just like investing in other assets like stocks, unit trusts, real estate and so on. It is expressed in currency pairs, where one currency is the base and one is the counter or quote currency, for example: US dollars and Euro or US dollars and UK sterling. The major currency pairs are Euro/US Dollar (EUR/USD) and US Dollar/Japanese Yen (USD/JPY), British Pound/US Dollar (GBP/USD) and US Dollar/Swiss Franc (USD/CHF). It is all about putting your money into other currencies, so you can gain the interest for the night, for time period or the difference in trading money all around.

Forex trading allows you to leverage more funds than you actually have by letting you put effectively a deposit on the purchase of a lot (Usually, a standard Forex lot is worth $100 USD) or a mini lot (Usually a Forex mini lot is worth $100 USD). This all depends on the margin you are trading at. For example if you purchased a lot of $100 USD by using the power of leverage you would pay $1 if you had a margin of 100 to 1.

It is a very interesting method of trading simply because it allows people from all over the world the chance to trade and strike it rich in a market that has untold liquidity. However it is a serious business and it is vitally important that you are properly educated and informed before committing your hard-earned money to the markets. Forex trading is a difficult concept to grasp, but it has a lot of going for it once you have grasped the concept.

Although very nerve wracking at times, Forex trading can be great fun to do. Also, when done correctly, it can also be very profitable in a short period of time. In part, this is because the Forex market operates throughout the world 24 hours a day for 6 days a week so there is nearly always trading opportunities to be taken. As well as this, regardless of whether a currency exchange rate is going up or going down, you can either buy or sell (even if you do not own that currency) and make a profit if the change continues in the right direction.

Trading on the Forex markets does take a lot of practice but this can easily be picked up by anyone with enough training. Although it may take some longer than others to learn, it can be very profitable once you know how to do it right.

Before embarking on trying to trade on the Forex marketplace, you will need to take several months researching how to trade. During this time you will need to watch the market and make sure you understand fully what is happening any why. Once you feel comfortable that you can understand what is going on, and then you should go ahead and do some practice trading with one of the many demonstration systems out there, using practice accounts so you will not have to risk any real money until you are ready. A major pointer here is to remember that Forex trading is high risk as well as high gain so you should only use money that you can afford to lose once you try trading for real. If you can only risk a small amount of money to start, then mini Forex trading would be the suggested route.

As already mentioned, Forex trading is a high risk, high gain business. When you first start to trade you will undoubtedly make mistakes the same as everyone else starting out. The key is to have nerves of steel and carry on trading by learning from your mistakes. Eventually you will be able to recognise the signals being fed back from the Forex marketplace and be able to act upon these to minimise the number of mistakes you make and also then minimise any possible risk.

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