Tired of your regular desk job and have a jest for finance, then forex trading is your cup of tea. Ok, please don’t go and quit right away. Read the reasons why forex trading will be good for you and kindly don’t quit. You can trade and have your regular jobs going on too…
Forex trading makes you a multilingual expert but only currency wise. When it comes to exchanging money, forex makes the transition easier.
What is Forex ?
Forex or Foreign exchange is the activity where you can bet if one currency will get stronger or weaker in relative to each other. For example, right at this moment with 1 EUR we can buy 1.17 USD and this exchange rate can change at any second. It is the banks which are continuously adjusting to the rhythm of supply and demand that are responsible for this exchange fluctuation.
Simple Forex scenario: Working the Forex trades
Now let’s make a bet that EURO will become stronger than the US dollar and we buy a EURO- US dollar pair.
Remember, when we believe that one currency will rise against another we buy the strong currency and we sell the weak one. Since in most cases the sales of the currency will be handled by an outside brokerage firm, all we have to do is buy euro US dollar pair. Another way to say this is that we will go long on the EURO-US dollar pair and we bet that Euro will rise against the US dollar or if we go long on the US dollar- EURO pair then we believe that the US dollar will become stronger than the EURO.
If we believe that Euro will become weaker against the dollar, we can also sell the EURO against the dollar or how people say it, we’ll short the EURO-US dollar pair i.e. we’re betting that the EURO will become weaker than the US dollar. Say, we have $1000 and under the current exchange rate of Euro versus US dollars, for 1 EURO you get 1.17 USD, and we forecast that euro will rise versus the US dollar. Based on this 1000 US dollars will buy us 854.70 EURO’s and if our forecast is correct, euro rises from 1.17 to 1.18 dollars. Being in the profit we decide to close the trade and exchange EURO’s back to US dollars which will give us 1008.54 USD, which is a profit of about $8. This is how Forex trading works.
Forex trading as a business
The forex Market is the largest market in the world whose basic agenda is to buy low and sell high. Forex trading as often misconstrued by people as gambling but it has more to it than just trading. It’s more like a business venture where you can get your profit as soon as you close the trade. The mantra to profit from Forex trading is to work as an astute businessman and not get all berserk about the changing market. One can rather observe and analyze what is happening in the market and take decisions accordingly.
Advantages of Forex Training
24 HOUR Global Market:
It’s a 24 hour global market that opens from Monday to Friday. The forex market starts each trading day all over the world regardless of whether it is in the day or night. Forex traders respond very quickly to any currency fluctuations unlike the stock market.
High rate of daily trade makes it the most liquid market in the entire world. According to the survey conducted by the Bank of International Settlements in April 2007, the average daily trading volume for the forex market reached an all time record of 3.2 Trillion USD.
With a daily trading volume larger than all stock markets combined, it ensures price stability. With such liquidity, forex traders can open or close a position without much difficulty and will receive a fair market price.
Opportunity to make money in both directions:
There is no such thing as bull or bear market in forex. In forex,it is of no concern whether the economy is booming or in recession. Regardless of how the current economy is, currency exchanging rates are always fluctuating and this in turn will provide the trading opportunity for traders to gain profit.
There are not major currency pairs traded in the forex market. Traders may have a better feel of price movement and behavior . In forex trading capital can be as small as $300 and such small trading amounts have the potential to earn hundreds of dollars per week.
Despite of the advantages of the forex market, one need to remember that you don’t always have to be right to make money trading. Sometimes it’s better to use power of risk reward and make sure you are winning trades more than losing. This step ensures that continuous motivation and self-control.