FOR FOREX TRADER

In its simplest terms, Forex trading is swapping one handful of money for another handful of money. The good news is, if you, as a Forex trading beginner, do it right, you’ll actually make a profit from it. You literally buy one currency and sell another, guided by which transaction seems most likely to be profitable for you.

The currencies of countries all over the world are constantly changing in value, moving up and down in relation to each other. This goes on all day, every day, throughout the year. The direction a currency moves is influenced by the political, economic (and even weather) events in that country. If there is a “secret” for the Forex trading beginner… it is to keep yourself informed about these movements and to learn when is the most profitable time to buy a specific currency and when you should sell.

Before Forex Trading – A Brief History

In earliest times, before money even existed, exchanging one thing for another thing was the normal way to trade. Today we call this bartering, and it began with daily necessities – my fish for your corn, my spices for your fabric – and it gradually grew too complicated for swapping one kind of goods for another. Eventually, people found it simpler to use jewels and precious metals like silver and gold to symbolize their goods. Even later, civilizations found that they needed some kind of standardized system, so money (coins) were invented. But as trade continued to grow, even coins became too bulky and heavy, so scrip, or paper money was developed.

Now, fast forward through history and it gradually became useful to actually trade the currencies themselves. The relative values of those currencies came to depend on increasingly intangible factors such as the size of their countries’ economies and how politically stable each country was.

Now enter currency trading. For the Forex trading beginner, it can all be pretty confusing with the constant barrage of numbers coming at you from every direction. Until you get past this early confusion, it’s very wise to use a broker for your Forex trading. Unless you’re a licensed plumber or electrician, for example, you probably wouldn’t tackle your own home remodeling projects. And you certainly wouldn’t do your own brain surgery, no matter how qualified you are. Likewise, instead of just jumping in and learning Forex trading by trial and error, it would be good to put yourself into the hands of a good reputable broker who can teach you how it all works.

What’s the Appeal of Forex Trading?

Currency trading can seem like a game to those with a little discretionary cash to risk. But remember, it is very easy for beginners (actually for anyone) to lose more money than they gain, so never play with more than you can afford to lose (because that could easily happen). The Forex market is really a lot of different currency markets in various countries distributed all around the world, so at least one of those markets is open (and often several) at any one time, 24 hours a day. This means that Forex trading goes on constantly round the clock, Monday through Friday, and Forex dealers are always available to help you invest.

What is the Risk?

A country’s currency can, without warning, suddenly rise or fall, triggered by events happening within that country. Such events can include (but are not limited to) the outbreak of war, a change of administrations, hurricane, earthquake, or any other disaster that could impact communication, transportation and crops or resources. This illustrates just how volatile the currencies market actually is. You never know what might come next, so this morning’s investment could turn good or bad within minutes, depending on an amazing range of events.

While risk scares many people away from Forex trading, this very same risk actually appeals to others. It may be like sitting at a giant slot machine, and instead of just 3 pictures to line up, the Forex trading beginner could have 20 of them. Or 50.

However, currency trading is not a 100% random gamble. Many ways to measure, quantify and analyze have been developed, and this tends to partially equalize the odds for the careful investor. This makes it a little more of a numbers and logic game. Mastering these methods of analyzing takes experience, but without that experience, a beginning investor could very quickly lose both savings and self confidence.

Vulnerable to Scams

Anywhere there’s money, you’ll find scams. That’s one of the facts of life. Since Forex trading offers at least the potential to make a million dollars from an initial investment of $1,000, it sounds like a very sweet deal to the Forex trading beginner. But this is exactly how over-excited, under-cautious new investors get swept away by stories of amazing riches. Clever scammers know this, so they use the impatience and naivety of newcomers to separate them from their money.

Remember – it is written that a fool and his money are soon parted. It doesn’t say he can’t get money… just that he won’t keep it long.

Low Entry Requirements

The initial deposits required for entering are quite small, so it’s easy to start playing the currencies market. And thanks to the low margin requirements, even small-time Mom-and-Pop investors can get into the game without putting their entire life savings at risk. At the same time, however, it can all feel just a bit TOO easy, and if an investor has a run of good returns at the beginning, he may be tempted to risk more than he can really afford.

What Is Bought and Sold?

All Forex trading is done with pairs of currencies. You simultaneously buy one currency and sell the other. The most commonly traded currency pairs are the Euro and US dollar, the US dollar and Japanese yen, the US dollar and Swiss franc, and the British pound and US dollar.

As with any new activity, especially an activity that involves a degree of financial risk, you should start by taking only baby steps. The safest way to begin Forex trading is to study, practice and gain an understanding of how things are done before you put money into the game.

Do your homework, look for a course, or dig into online Forex market websites. Never even think about using a broker or trader who isn’t backed up by a reputable company. The Forex trading beginner may find it all very thrilling, but it can also be disastrous at times. Approach it the smart way. Start small, be cautious and gradually build up your experience.