Today Forex is the largest market in the world, according to XE.com, with around 3.2 trillion US Dollars in daily volume. The sheer size of the market means that there’s potentially a piece of the pie for everyone; from giant companies right down to private traders buying and selling currency on their living room sofas.
Getting a Grip on the Basics
Forex trading might seem less risky because you’ve only got a set number of currencies to trade with, as opposed to over 5,000 different kinds of stocks. Most trading experts however will tell you that the financial risk is still high.
Fortunes have been made and lost by misjudging the Forex market; George Soros famously made a $1billion in a day by trading currencies. Conversely the Brazilian Aracruz company lost close to $2.5 billion when it bet on the Brazilian Real to remain strong against the Dollar in 2008.
Currency trading certainly is an arena where shrewd investors can make their money – if they paid attention to the basics: from learning what jargon like asset allocation or REPO actually mean to coming to understand how and why currency values fluctuate, it’s important to understand how the market operates
Naturally most traders make mistakes every now and again; which is why a key point to bear in mind is to not risk money you can’t afford to lose; the market is just that cut throat. While it’s not too expensive to get your feet wet, the potential losses could cost you dearly so start small.
It also helps to practice first. Most Forex dealers offer free demos through which the uninitiated can practice with ‘fake’ money until they feel comfortable enough to open an account and start trading for real. Make use of them.
First Steps In FOREX offers weekly advice and information on the markets, you can listen to the podcasts for free on iTunes and they begin right from the very basics.
Trustworthy Trading Tips
ForexFraud recommends defining your risk profile before commencing trading; it makes sense to know how much you’re willing to risk and how much you can afford to lose (potentially).
If you’re going to use a Forex broker choose that person wisely; do their trading patterns suit your needs? What is their service like? After all, you wouldn’t go into business with a complete stranger, would you?
eToro recommends watching the best traders closely and learn from their years of experience and intuition.
The group also advises budding traders to plan ahead; don’t just jump at every movement in the market. Know which currencies you’re interested in and what’s going on with them.
The last tip is likely the most difficult one to put into practice; shelve your emotions. The Forex market is not an environment that rewards emotion, it works performs best when approached with a level, cool head. Emotional decision can lead to rash actions and large losses.
The Forex trading market is accessible to almost anyone but a final word of advice would be to proceed with open eyes and a healthy dose of caution.
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