The Foreign Exchange, generally known as ‘forex’, is simply the largest currency exchange market of the world today. Leading traders on this market include governments, corporations and banks. In one single hour, a larger sum of money is customarily traded in forex trading compared to an entire day’s trading of the New York Stock Exchange. With such huge amounts of money floating in the air, it should not be difficult to divert a handsome chunk towards you.
Compared to the NYSE, currency trading is relatively simple. Forex generally has around 30 currency pairs only when compared to an entire universe comprising thousands of diverse stock offerings on the NYSE. In forex trading, international currencies such as the USD and Euro are paired together to produce an option of buy/sell to the forex trader.
Following are few of the things you will require as a successful forex trader:
Now as to how Forex trading actually works
When playing on the forex market, you will have two distinct choices, i.e. buy or sell. As there are around 30 currency pairs, such as Great Britain Pound versus the US Dollar or the European currency known as Euro versus the Swiss Frank, the forex market cannot be called extensive.
Average forex trading would be more like: Assuming One Euro is equal to US $1.30. Taking this price as a base you can buy Euros, expecting them to go up, or sell your Euros, expecting them to fall versus the US Dollar.
While trading in forex, you either buy or sell your currencies in ‘lots’. Hence, a standard lot is made up of a large block of funds which your forex broker offers. The overall lot size is not of any relevance to forex accounts, as it is you who determines the price that you want to place on the move of the currency price.
As currency prices normally move in minimal amounts, pennies have to be sub divided further into pips. Pips are one hundredth of one penny in case of a USD-EUR pair. As such, using our earlier example, one Euro equals 1.3000 and when it rises to 1.3025, it indicates an upward move of 25 pips.
At the time of placing your trade a given pip may be worth just a penny, a dollar or maybe even more than that. In this case, 20 pips would be equal to 20 cents, 20 dollars or even more than that. When you opt closing your order all the additional money becomes yours.
Opening a Forex Account
There are several online brokerages you can use. They make forex trading easy, fast and simple. You may personally favor a particular brokerage, but most brokerages are nearly the same, with just a few minor differences, such as minimum balance and deposit methods. You would be well off closely looking at a few prior to opening a live account with one of them.
Before trying any online forex broker out, open a simple demo account to get complete understanding of the client relations and software of the broker. You should also be able to retain some recourse to your broker.
Develop an Expert Advisers System
Expert advisers may sound like humans, but are automated programs for trading in reality, who can execute forex trading on your behalf. With built-in computer algorithms, they are excellently programmed to interpret a particular market condition to implement a trade. Though Expert Advisers may be exceptionally profitable, you must realize that they are just like racing cars: they will work excellently when engaged under the right forex trading conditions.
I am personally convinced that you can readily make some good money in forex trading. The more difficult part comes when you need to keep the money after you have made some. As forex accounts are made up of the money you have deposited in them, there is a distinct possibility of quickly wiping it off with some bad decisions. Very turbulent moves in trading can result from major financial news, such as a government bailout announcement. This may sky rocket any currency pair hundreds of points. In order to avoid ending up losing all your funds you must have a proper money management system.