The value of currencies goes up and down every day and you can
potentially make money from the movements of these currencies. More than
a decade ago, foreign exchange transactions happened exclusively
between major banking institutions, corporations, and brokers. But, as
technologies improved, particularly with regards to online trading, the
currency market has become more accessible to retail traders.
Foreign exchange market in a nutshell
Forex
is the biggest financial market worldwide, with an average trading
volume of US $4 trillion on a daily basis. It is so large that the
pooled trading volume of the stocks and futures markets merely equal
one-fourth of the currency market. The large size of this financial
market allows for impressive liquidity and reduced transaction cost. The
market is open twenty-four hours a day, about six days weekly, and
therefore allows you to trade currencies and keep your day job. You may
also trade on leverage. Which means that you can hold a large position
for a much smaller money. Making use of leverage can amplify profits,
but it can also do the same for losses.
How to be a Forex trader
Forex
transactions are usually performed via a broker. The two main types of
brokers, which are, market makers, which make bid/ask prices and act as
counterparty to your trade, and electronic communications network or
ECNs, that do not establish prices, but instead obtains prices from
multiple market participants. ECNs provide traders direct access to
other participants in the network. Many people prefer Forex trading via
ECNs because they are better when it comes to transparency and in
addition, generally offer tighter spreads.
Foreign exchange
trading is lucrative if you understand what you are supposed to do. Seek
instruction from a Forex trainer or by reading publications about
Forex. As a trader you will have to develop your own techniques, but it
can be valuable to have some professional direction when you are just
beginning your journey. You need to practice with a demo account before
you decide to trade with actual money. That way, you get initial
experience and confidence without risking real money.
Is trading in the Forex market risky?
Yes,
the Forex market is risky. However, Forex risks could be measured, and
thus, for the most part, can be managed accordingly. Understanding the
dynamics of the market by understanding both fundamental and technical
analysis will help you control your risks adequately. Risking only a
small percentage of your total capital per trade will also help you
steer clear of substantial losses. Although trading in the Forex market
is inherently risky, having a disciplined approach and effective trading
habits will produce good rewards.
Forex trading is not devoid of risks, but since these risks are
measureable, they can be managed accordingly. For more information on Forex market and how to be good at it, visit here.
