Background to the Foreign Exchange Market
Forex or Foreign Exchange is a form of trading where you trade Currency. Currency rates are constantly rising and falling. A Forex trader, can make money by taking advantage of this rise and fall in currency rates. While there is a lot of potential in Forex for making money, there is also a lot of potential for losing money as well. That's why its important that you learn Forex, and have an understanding of how it works, before you start trading in the Forex markets. Forex is somewhat like stock exchange, with a couple of distinguished differences. The first and foremost important difference between Forex trading and stock trading, is the fact that with Forex you can trade any currency from any country.
The Forex Market Appeal
In the past few years Forex market trading has become exceedingly attractive, as a new investment opportunity. In the past there was some restriction on just who could participate, primarily being, only the large corporate institutions and banking houses, but with the advent of the Internet the market has opened up to any individual person looking for a new way to make some money. Forex market trading is a bit different to the average perception of markets such as buying and selling stocks and shares. Forex deals in exchange of currencies between two countries at any given point in time.
Featured Forex Brokers
As you are no doubt aware from constant news reports, or even watching your own bank balance go up and down if you have overseas investments, currencies rise and fall rapidly, affected by events such as changes in the economy of a country, or leadership or shortages of a particular commodity. There are any number of newsworthy events that can affect the value of the dollar or whichever currency you want to deal with.
Because that’s what Forex is all about, buying and selling currencies all over the world to make a profit. Whereas the stock market is regarded by some as being somewhat staid and predictable to a point, Forex is a different game all together. The simple explanation is that you are dealing with two currencies (a pair) at any given time, e.g. with USD/AUD the US dollar is the currency you are buying and the Australian dollar is the currency you are selling. You buy a currency at a lower price in the expectation the value will rise and you can make a profit. Now whilst that rise might seem minuscule i.e. only a percentage of a dollar, if you add up the totals of what you bought, that could be quite a tidy sum in profit.
This market is often referred to as being extremely volatile and it’s easy to see why many would think that way. Fortunes can be made and lost in seconds. There is a tremendous opportunity for the canny and astute trader, but it comes down to being versed in the rules and knowing what you are doing.
Whilst not as complex to learn as many other trading markets, it is important to have a good grasp on what you are doing. The simplicity of the concepts, and the fact that no huge outlay is required to get started, has drawn many newcomers into Forex trading. The widely touted newspaper reports of instant fortunes have probably added a little bit to the glamour.
Initially Forex trading was restricted to large corporations but as the Internet grew in popularity it opened up the market worldwide. The individual who wanted make a bit of money in their spare time or even give up their full time work now had a chance to participate. The Forex market is open 24 hours a day 5 days a week, and that meant no matter where you lived there was always going to be an opportunity to trade.
But if you think Forex market trading is something you could get involved with, make sure you undertake a bit of learning first. Learn the rules; there is a lot of free information on the net, start getting used to watching the world news and events to be able to forecast changes, check out the different online brokers, and open a demo account to practice with. When you are ready all the equipment you will need to get started is a computer and fast Internet connection.
Important Tips for Traders Starting Out
Use online forms and communities to not only learn more about Forex, but to also find a trusted broker. This is basically it. Foreign Exchange is all about exchanging currencies at the right time. Mastering such a skill, can only be achieved by extensive training, and trial and error. Of course, you don't want to do that with real money. That's why it's a good idea to use tools available for beginners, that let you practice trading and sharpen your skills, without actually risk losing your money by trading in the real Forex market.
A simple search on google will bring up hundreds of softwares and websites that offer such a tool for beginners to sharpen their skills before they start trading in the real market.
Remember, like any other form of trading, there are risks involved. Learn and understand Forex as much as you can, before getting into the market. Don't make the mistake of many people, who start trading, without any knowledge and real understanding of how currency trading works, and end up losing all their money, in a mater of hours. Spend some times and effort, to clearly understand the foreign exchange market, and how its effected by global affairs. It may be a while before you start trading in the Forex market, but, a through training will not only help you save a lot of money that other wise you would have lost, trading foreign currency with no experience, it will also help you make big money with Forex.
On a note of caution, Forex market trading can require split second decisions, and can guarantee to have the heart pumping a bit faster from time to time. So if you are a person that likes to weigh up all your options carefully this might not be the choice for you.