Amount Of Money

Currency Trading Basics

If you are thinking of investing in the money markets, you need to know currency trading basics. This way of making money is also known as forex or foreign exchange trading. You may even see it abbreviated to simply FX.

Forex trading involves buying and selling currencies according to your assessment of which country’s currencies are likely to rise in value and which will fall. You can judge this from financial news or from monitoring price movement charts for trends and patterns, or you can use both methods of analysis.

The foreign exchange markets are huge, with a turnover of around $4 trillion dollars every day. Most of this money is in the hands of the international banks and financial institutions but there is plenty of room for the small private investor. With this amount of money involved, plus the constantly fluctuations in prices (volatility), the forex markets are potentially the most lucrative market that you could get into.

You only need a small amount of capital to get started. The costs are low because brokers do not charge fees or commission, but earn their money from the difference between the buy and sell prices of a currency. This means that you can make many small trades without having to pay a fixed commission fee. Stock exchange trading is not so easy. These are just some of the reasons why more and more people are becoming involved in forex trading.

Another advantage of the forex markets is that you can trade 24 hours a day, five days a week. This makes it convenient for people who have other commitments during normal business hours. You can trade from any time zone at any moment, when it suits you. You do not have to be online in the day time.

As with any investment strategy that has the potential of large gains, there is also risk. Currency prices can change very fast and you can make a lot of money in a short time but you can lose it too, unless you are very careful. You should accept before you start that you may lose the money that you are trading with. At the same time, take your trading seriously. Do not treat it as a game. Keep clear records of what you did. However your trades turn out, look carefully at the results to see what you did right or wrong and learn from that.

You need a profitable system, clear strategies and the ability to stick to your decisions. You should not be constantly changing your tactics or acting from out of fear or greed. Consistent application of your system is vital.

When you are trading forex, you are in full control of your investment. You are not dependent upon the results of companies, as you would be with an investment in stocks. Of course prices will be affected by national and international events but you can often see these coming and exit the market before a major news announcement is due.

With good advice and a sound grasp of currency trading basics, you can begin to trade. Your financial future is in your own hands.

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Tuesday, June 23rd, 2009 Introduction No Comments

FX Trading: Who, Why And How?

Forex or FX trading is a way of making money from currency price movements. Forex traders buy and sell world currencies according to whether a currency seems likely to rise or fall.

Who Can Do FX Trading?

When you first hear about currency trading you might think that you need to know a lot about economics, politics or finance. You might think that all forex traders would be employed on Wall Street or other financial centers of the world. But this is not true at all.

In the past, it was certainly the case that the foreign exchange markets used to be almost entirely dominated by banks and investment companies. These days, however, all of that has changed. There are two main reasons for this.

The first is the internet, which allows anybody with a high speed connection to have access to up to the minute prices, charts and other data. People can trade from home, connecting to their broker and controlling their account online in real time. Brokers have seen the opportunity and reduced the amount of money you need to get started, encouraging people to start trading with only a few hundred dollars.

The second big development in fx trading has been the appearance of forex robots. These are automated trading programs that you can set to run on your own computer. They will connect up with your broker’s website and make trades for you. This means that you do not even need to know a lot about finance to get involved.

Why Would You Become A Forex Trader?

Why? Well, to make money, of course. At least that is most people’s reason for getting involved in the forex markets. It could be that there are some people out there who just enjoy the challenge and treat it as a game, but unless you are just using a demo account it is better to take it seriously.

Forex is a risky business with the possibility of making losses as well as gains. Money can come and go very fast. When you make a deposit into your brokerage account it is best to think of that as money spent. Any income that comes back from it is a bonus. Do not trade with the rent money!

How Do You Get Involved?

To begin forex trading you will need an account with a broker. If you want to use a forex robot you should get that right away and start using its demo settings so that you understand how it works and can see it making profits before you let it control your real money fx trading account.

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Thursday, June 18th, 2009 Introduction No Comments

Foreign Exchange Market: Simple Glossary

The foreign exchange market has many factors that make it unique. It has been described as the closest to pure competition that can exist, even though the international banks attempt to control and manipulate it. But what makes it so special, and why might you consider that you are more likely to be able to make money on the forex market than other forms of investment trading such as stock trading?

Trading Volume

The amount of money traded on the forex market daily is immense. The average daily turnover across the world is almost $4 trillion, according to a survey by the Bank For International Settlements in December 2007. The biggest trading center is London, followed by New York and Tokyo. However, the US dollar is the most traded currency.

Liquidity

The liquidity of a commodity is its ease of conversion to cash without impacting the value. Money is already money, so it is more liquid than any other asset. This means it is very easy to trade.

A Global Market

Forex is not traded in one place but all over the world. This means that, while of course it is affected by national events in the biggest financial powers, the effects are balanced out. Currencies do not have absolute value: a currency’s value can only be measured in comparison with another currency. So if one currency falls in value, another will rise.

Compare this with the stock exchange where it is possible for the value of every company’s stock to drop at the same time. All you can do in a major stock market crash is to withdraw your investment. But in forex, you can switch from the falling currency to the rising currency and still make money.

A 24 Hour Market

Currencies can be traded in different parts of the world 24 hours a day, five days a week. The foreign exchange market opens at 22.00 hours UTC Sunday in Sydney, Australia, where it is Monday morning, and closes at 22.00 hours UTC Friday in New York, where it is Friday afternoon. So whatever time of day or night you like to trade, you will have the opportunity, unless your only free time is on weekends.

Leverage

Leverage is where a small amount of something can be used to control a larger amount. In forex trading, leverage is related to the practice of trading on margin. You invest a small amount in your brokerage account and your broker lends you the rest, so that you do not have to put up the whole value of your position.

Forex trading offers more leverage than stock or futures trading. You may be able to control up to 200 times your account balance, depending on the broker. Higher leverage gives you the chance of bigger profits, but of course, there is also the risk of bigger losses. You will not necessarily want to take the maximum leverage on the foreign exchange market, especially in the beginning.

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Monday, June 8th, 2009 Glossary No Comments