Trading on the forex (or FX) market is something most of us have never considered as a way of making money. The world of professional finance often seems very distant from the real world, and sometimes it is, but it’s actually much easier to become involved than you might think.
When you think of an investor, a bank or wealthy businessperson probably comes to mind. In reality, it could be you or me. Trading currency for profit does not require a huge capital. While you will obviously make more money the more you have available to put in, many brokers will allow you to start with as little as $10. Most also offer a demo service, so that you can trade with virtual money to see how the whole thing works. All you need is a computer and an account with a forex broker.
So What Are the Basics?
In its simplest terms, the forex market is all about buying and selling currency in order to make a profit. This profit is made because the value of one currency against another constantly fluctuates. The aim is to speculate on whether the currency pair, e.g. GBP/USD, will strengthen or weaken. You ‘buy’ a currency when you expect it to increase, or ‘sell’ if you expect it to decrease.
There are many influencing factors and complex charts that can help you decide how to trade, but one of the simplest ways of determining the direction of a currency is to use the news. If the news sounds like the economy of one currency is declining, then it’s reasonable to assume this will be reflected in the value of the currency.
Once you become comfortable predicting patterns based on the news, you can look at all other kinds of signals, such as those you can see in charts and fundamental analysis. Experienced traders use a whole host of sources to help them trade fx .
Using Leverage to Your Advantage
Forex is open to anyone because, unlike the stock market, you can deposit a small amount of money which allows you to hold a position of a much higher value. Many brokers offer leverage of 100:1 which means that if you deposit $10, you can reap the benefits of trading with $1000. It is very important to not however, that as the market fluctuates, it is possible to lose money, and this could exceed your initial deposit.
Trading on the forex market might not be for everyone; there is an inherent risk, but with practice and careful strategy, making money is certainly possible. There is a wealth of in-depth information available on the internet for free, so even learning doesn’t have to cost you a penny. If it sounds like something you’d be interested in, why not try out a demo account? They cost nothing and you can really get a feel for the market. It’s not just a way of making money either; forex is exciting.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.