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So You Want to Trade Forex Currency? Read On by John Eather
If you trade Forex, you
have a very enticing way of investing. The trades are usually free of
commission and also tax-free. On a first look at a typical currency
chart, the eye is quickly drawn to the movement within it and the brain
quickly starts calculations like: three hundred points at two dollars a
point... Etc.
The first thing to remember is that it is because of this precise
volatility that fortunes are won and lost on the forex exchanges. Also,
it will not be possible to access more than fifty percent of that
liquidity in your trades - if you are good!
Most of the trading on the forex is done by the big banks and
corporations which also shape the way the market moves. These big
movers and shakers invest billions of dollars in the form of funds and
hedge funds.
But it is also possible for individuals to have access to this market.
About 2% of all the trades placed in the forex market are by individual
investors.
Money is made by trading the change in currency pairs. So for example,
a bet can be placed on whether the dollar will go up or down against
the yen. This bet can be as small as a few cents or hundreds of
dollars. If your trade is for the dollar to go up and it goes up by ten
points, then you make ten times your initial bet.
Buying and selling is commission-free. This is unlike traditional
shares which actually have to be bought and sold via a broker. Also,
many trades can be placed straight onto the exchange so that anyone
with a computer can place trades through a mediator.
Trading is exciting and fast-paced. Some trades can last minutes or
seconds, or hours and days. It all depends on your trading style and
which system you have developed. Always remember that the market moves
down as well as up! Never invest what you can't afford to lose.
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