FOREX market is the purchase or sale of a currency against sale or purchase of another. The point in Forex is to exchange currencys in the expectation that the currency you bought will increase in value compared to the one you sold. With proper Forex education and training you can speculate the direction of the market and are able to receive a good ROI.
Who trade on Forex? Commercial and investment banks and also central banks. There are also corporations, hedge funds, and millions of speculating traders. Some top banks in the world such as Bank of America, Credit Suisse, and Morgan Stanley are major players on the FOREX market. It is important to understand that, you will be competing against all the major banks and a lot of individual traders.
When trading on FOREX, it’s important to understand the affect broker has on everything you do. After all, the broker is the one paying you. A broker is like a middle man between you and the FOREX. When you want to place a trade in the FOREX, your position is filled by the broker. The broker sends the order to the banks. Your money is with the broker and they need to be able to cover your positions in the market. Usually brokers offer a 3 to 5 pip spread on all the major currencies pairs, such as the ERU/USD, GBP/USD and the USD/JPY. A 3 to 5 pip spread basically means that the FOREX must move 3 to 5 pips before your trade is in profit. One pip can be worth any amount, depending on how much money you put into the trade.
There are mostly two types of traders!
- There are the ones who study the cause of market movement, and the ones who study the effect. Most traders identify themselves as both. The first group focuses on the charts, indicators and chart analysis.
- The second group is also aware of the fundamentals. However, the problem is that the charts and fundamentals are often in conflict one another. It’s usually a wise decision to have a bit of training in both fundamentals and technical analysis.
It’s also important, that as a Forex trader you have to manage your money. As a trader you can experience losses in the FOREX; therefore it is essential that you utilize proper money management. In many cases money management is a simple concept, yet to practice money management consistently is very challenging. Most people have not even saved any money. Generally speaking managing your money is knowing when to cut your losses.
Trading with Forex market is definitely not easy. It takes time, focus, stress and willingness to learn.