To be a Forex or foreign exchange trader no longer means you have to work for a bank in one of the world?s financial centers. These days you can trade for yourself, from anywhere.
Since the rise of the internet many people do it from their own home, make money at their leisure, or even produce a full time income. But what is Forex trading and how does it work?
A foreign exchange trader deals in currencies. He or she will attempt to sell one currency that seems to be falling in value; to buy another that seems to be rising. There are always two currencies involved in a transaction (a currency pair) because when you want to buy dollars you have to have another currency to exchange for them.
In the beginning it is best to be involved with only one currency pair. Most people start trading the EUR/USD market, which is the euro against the U.S. Dollar. This is the largest Forex market. There is plenty of information available about this market and it has a tendency to have lower costs and be relatively stable.
Still Forex is a very volatile market. This means that prices can rise and fall steeply and quickly. Risk is high. It?s easy to lose money. In fact, some losses are inevitable, so you need to manage your account, so you never risk too much on one trade. You can use stop losses so that your broker will automatically sell if the price goes a certain way against you. The purpose is not to avoid losses entirely, but to ensure that your profit is higher than your losses so you end up with a net profit.
You must have access to a computer with a high speed internet connection any time you want to trade. Unless you are using a robot to manage your currency trading, you will also need time, where you can concentrate on learning a profitable system and then the trade itself. You pretty much have to lock yourself away in a room to do so, at least for a couple hours a day. It is no good trying to trade from your desk at your day job with your boss interrupting you, or using a computer in the family room with children climbing on your knees to play. You need to be fully concentrated on the movements in the market, or you may miss the right moment to either open or close a trade.
If you are a cautious person who likes a solid investment with a predictable low return, you should not be a currency trader. Forex traders are people who like risk and love the challenge of trying to make profit in a rapidly changing market.
It helps if you are highly focused on your goals and not easily controlled by emotion. It is important not to let fear of losing or dreams of enormous wealth make you become unfocused from your strategy. You also need to stay aware of financial news, not just in your own country, but in all the major world powers, because this will affect the Forex markets. With these properties and a good trading system in place, a foreign exchange trader can potentially reap significant gains from his or her investment.
About the Author
Christopher Shepherd has been actively trading in the foreign exchange markets for the past 15 years. Recently he has been using his experience to write reviews of automatic forex software systems. This information as well as a series of informative posts about the forex market can be seen at http://forex-exchange-trading.com. Please also read his blog The Essentials Of Forex Trading.
Source: http://www.uybaweb.com/2012/07/How-to-Get-Started-As-a-Foreign-Exchange-Trader/
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