Beginner help with Forex Currency Trading
- Pini Soliman
- July 14, 2013
Beginner help with Forex Currency Trading: What Is It All About?
For a beginner forex currency trading may seem to be a whole new world but in fact the basics are quite easy to learn. You just need to understand the buzz words and trading terms and grasp a basic understanding of how the markets work.
Making big money in a short time is what forex currency trading is all about! It is possible for investors to make a lot of money very fast because the rates of exchange on the foreign market can rise and fall quickly. This means of course that it is risky and there is also a chance of losing a lot, just like most things in life that have the potential of big returns.
As you will know if you have ever exchanged currency for a vacation, the rates are constantly changing. For example you may change $100 into another currency planning to travel, and then find that you do not need it and change it back. The rate will probably have changed in the meantime and you may even have made a profit.
Forex traders deal in currencies hoping to make a profit all of the time, but instead of changing money at the bank they use a broker. Most transactions these days are handled online. In many ways it is not so different from stock trading. There is the same potential to trade in margins where a small balance held by your broker can control much larger deals.
One difference from stock exchange trading is that forex traders are not limited to dealing in their own country. You can trade any two currencies regardless of where you live. This also means that the market is international. Because of time zone differences, it is open 24 hours a day from Monday morning in Australia to Friday afternoon in New York.
Each currency is represented by 3 letters: USD for the US dollar, GBP for the British pound, EUR for the Euro, JPY for the Japanese Yen, CHF for the Swiss franc, CAD for the Canadian dollar, AUD for the Australian dollar etc. The exchange rate between two currencies may be expressed like this: USD/CHF 1.14. This means that to buy one US dollar you will need 1.14 Swiss francs.
If you want to start out in forex trading you will need to look for a broker or investment management company that you trust. It is worth shopping around and checking online forums for recommendations. Check out how long the company has been in business and what your rights and liabilities will be. Read all of the fine print.
You will probably also want to use a bot to do your trading for you. This is automated forex trading software that can trade 24 hours a day according to rules that you set for it. There is usually a demo option so that you can test out the whole system for a while before you let it trade with real money. There are many forex robots on the market and most of them come with full instructions for beginner forex currency trading.
Trading in Forex: Some Fundamentals
Forex trading may seem intimidating. The market trades over three trillion dollars a day and that figure continues to grow. It was not long ago that it was just over a trillion dollars. Many people simply assume that only the extremely wealthy can trade money in quantities of that size. However, that simply is not the case.
Forex consists of the market in which different currencies, such as dollars, euros, and yen are traded. Investors speculate on how the value of currencies will change and buy and/or sell them accordingly. For example if an investor has information that a particular currency, such as the dollar, will increase in value, he/she may buy a particular quantity of dollars. After the currency gains value and the investor believes that it has peaked, he/she may sell it and thereby gain a profit. Financial institutions list currencies according to three-letter codes e.g., the U.S. dollar is listed as USD, the pound is listed as GBP, etc. The particular exchange rates are expressed as ratios. For example the exchange rate between Currencies A and B may be 1:1.5, meaning that 1.5 units of Currency B are needed to buy a unit of Currency A. If 1.5 dollars are needed to buy 1 pound, the exchange rate is expressed as GBP/USD 1:1.5.
Although the forex market theoretically focuses on trade conducted in a few locales where the finance industry concentrates i.e., New York, London, and Tokyo, trading is conducted online and is therefore not fixed to particular locations. An individual may conduct a trade from a ranch in rural New Zealand as easily as on Wall Street.
Nowadays, the number of resources available to trade in the forex market parallels the amount of money traded. These resources generally belong to three main categories: brokers, tutorial systems, and automated systems (bots).
Forex brokers act in the same way as stockbrokers. They advise their clients on trades that offer the clients opportunities to realize profit. Many people feel more comfortable speaking to a live person about their investments instead of entrusting their earnings to computers. When deciding to open an account with a forex-investment firm, you should first find out what others have said about the firm and see how their success rates among others.
Automated systems, commonly known as “bots,” consist of software based on computer algorithms. Software developers and people with forex experience design them to predict how values of different currencies will rise and fall. Many of these systems operate off-line so that the bot licensee may gain profit even while sleeping. There are different systems, so you should read product reviews and testimonials about them before deciding which one is best.
Tutorial systems consist of educational software. They specifically target consumers who would like to learn more about the forex market to become more informed and thereby make wise choices for other forex-related decisions. As with any software you should also read consumer reviews of tutorial systems before deciding which one to purchase.
The forex market holds abundant opportunity. There is, of course, risk involved as with any investment. However, for many the opportunities for gain far outweigh the risks.