Fifteen years ago when the economic gloom descended on the world, most conservative investments no longer held any attraction for the average middle class investor. Such was the need of instant liquidity that the usual bank securities, mutual funds and stocks quickly faded into the background. Yet, gaining in stature and solidity was Foreign Exchange (Forex) trading. This, however, was to remain the exclusive domain of the big time investor for some length of time.
Not surprisingly, when the doors were wide open to the public at last, there were very few smiles. The majority of the new traders, without any experience or trading skills, were quick to part with their money in undue haste. And, while they only had themselves to blame, they were less than charitable. There was “no money to be made” they chanted and declared forex a scam. Little did they realize that if that was so, trading in foreign exchange would not have hit a staggering high of $4.9 trillion in daily trades as it stands today. This makes it at least 30 times bigger than the Nasdaq and the NYSE.
At the beginning it must be understood that foreign currencies is what all nations need to buy goods from one another. Similarly, if you choose to visit a foreign country, you will be required to make all payments in the currency of that country. The prices of these currencies are prone to fluctuation from time to time depending on economic, political and reasons attributable to nature. Another reason is supply and demand. For example when there is a greater need of the U.S. Dollar, the cost of the dollar will rise. Conversely, when this currency is in excess, the price is liable to go down. Yet, the more prominent currencies like the U.S. Dollar, the British Pound Sterling, the Euro and the Japanese Yen are less prone to fluctuations in comparison to other currencies.
The foreign exchange market determines the relative values of different currencies. It is the largest market in the world and yet there is no central marketplace for the exchange of currency. Instead all business is conducted over-the-counter and online. This decentralization offers traders the opportunity to choose from different traders to make trades with, at competitive prices. Whereas, in the stock market the trading is in commodities that bring in the profits, forex trading deals only in currencies where the choice of currency of one country is pitted against the other. This market is open twenty-four hours a day, five days a week, with currencies being traded around the world in all of the major financial centers.
As it stands, the forex business appears remarkably simple for beginners to comprehend. What needs knowledge and experience is the expertise to open a trading position at the opportune moment and close it with profit. That is all there is to it. But in the hard world of financial reality, successful trading is carried out in a professional, systematic and scientific way. The ultimate aim is that small but consistent gains generate positive results and capital growth over the long-term.
To ensure handsome profits from currency trading, it is recommended that you gain some knowledge about the Foreign Exchange market first and then practice in a demo account with one of the brokers. Save yourself the unfortunate experience of rushing in, trading with real money and emerging desolate and empty handed.
“It’s best to delve into different asset classes,” says a financial expert: “Most of the general public is used to trading in equities. It’s best to diversify, and the forex market is many times bigger, and more liquid.”
Forex trading is typically done through a broker , also referred to as a market maker. The leading ones offer email alerts, incomparable forex signals service with a sophisticated trade copier. Once you have set up your account with one of them, you will seldom be required to do another thing. Monthly memberships are designed to suit your convenience and come at a nominal price.
The good news is that U.S. based forex brokers have reported an average of 28.5% profitability, with some brokers claiming profitability results as high as 50%. Hopefully, these are facts that should resolve any doubts one may harbor about the possibility of making money in forex trading.
Finally, if investing in forex has got you interested, why not give it a try for a few months. Who knows what begins as a trial venture may end up becoming a satisfying addiction for life?