The currency trading (foreign exchange or more know as Forex) market is the biggest and fastest growing market on earth. Its daily turnover is more than 2.5 trillion dollars. The participants in this market are central and commercial banks, corporations, institutional investors, hedge funds, and private individuals like you.
In Forex markets, investors trade on currencies of various countries (as well as gold and silver). For example, you might buy euro with US dollars, or you might sell Japanese Yen for Canadian dollars. It’s as basic as trading one currency for another.
Actually, Forex trading is quite similar to share market. You need to have adequate market info in order for you to win in every battle. But the difference between Forex trading and share market is Forex trading will not lose more than your initial investment.
How to let you more alert on Forex trading? Below I will share my opinion on it:
- Trading Currencies – Forex trading is always done in currency pairs. For example, imagine that the exchange rate of euros to US dollars on a certain day is 1.1999, in which the number is called Forex rate. If you had bought 1,000 euros on that date, you need to pay 1,199.00 US dollars. Certain period later, the Forex rate is 1.2222, the value of the euro has increased in relation to the US dollar. If you sell it now, you will get profit of USD23.00. This is the power of forex trading. Of cause, you will have to chance to lose money if you are not careful about the market.
- Market alert – Before you want to start invest in Forex trading, you should furnish yourself with ample market info. This info can be obtained via newspaper, business show, press conference, business magazine, etc. Actually a country’s currency is hugely influenced by major events, e.g. launching of mega projects, inflations, fluctuation in commodities price, etc. Of cause, the safest way to invest after any news announced. But always the case where high risk will bring higher profit. So, invest on Forex requires sharp-sighted on market.
- Volatility and risk – Volatility is the degree to which the price of currency tends to fluctuate within a certain period of time. For instance, in an active global trading day (24 hours), the euro/dollar exchange rate may change its value 18,000 time flying 100-200 pips in a matter of seconds if the market gets wind of a significant event. Seeing these, high volatility will create a great fluctuation in currency; profit and loss is all happen in just a glimpse.
- Frequency of trading – Most investors thinking that involve actively in the forex trading, they can have more market awareness and able to earn good profit. In fact, this is not true. Each year, forex trading market will have a few times of great transaction. As a prudent investor, you should invest at the right moment.
- Monitoring news – Keep abreast of world news. Read all the headlines, particularly those directly related to Forex. Check the impact of such news, if any, on the charts. Also, read daily/weekly outlooks posted on Forex or general financial sites. Many include alerts to upcoming reports and events such as market indicators and interest rate decisions. Besides, you should pay attention to forecasts, some of which are available free of charge. Bear in mind that forecasts and predictions are made by people, none of whom can guarantee the occurrence of future events. Don’t forget about Forex glossaries, which are offered free on many platforms. A given word may have different meaning as it relates to Forex and to the terminology used by the Forex market participants.
- Investors’s self discipline – Always remind yourself that you should only invest when you are confident. Don’t listen to rumors. Always the case that people lose money because of their greediness and listening to other people ‘tips’ without details study.
Lastly, I would like to inform you all that the potential financial risks of engaging in foreign exchange trading. Before deciding to undertake such transactions with a Forex trading platform, a user should carefully evaluate whether your financial situation is appropriate for such transactions. Trading foreign exchange may result in a substantial or complete loss of funds and therefore should only be undertaken with risk capital.