What is it?
Forex is the trading of different currencies around the world against one another. Not many people are familiar with it the way they do with the stocks markets. In fact, both of these markets are completely different and no it is not a scam. Forex is nothing new but considered to be one of the most volatile than any other markets but yields the most returns(if you know what you’re doing). It’s daily turnover is average to be around $3.98 trillion. That’s a lot of money being traded so you don’t have to worry about any kind of economic downturn or whatever that’s going on with the world. There’s always money to be made with Forex unlike the stocks markets which depends on the current economy. Again, if you know what you’re doing.
How do you trade with Forex?
Trading Forex is as easy as putting coffee in your coffee cup in the morning and flip open your laptop on your couch and trade away. However you need a special software that your Forex broker provided you upon signing up so you can sign in and trade. There are four main major currency pairs that most will prefer to trade: EUR/USD ; GBP/USD; USD/JPY and USD/CHF.
The Concept is simple, once you download the trading software that your broker provided. You will be given a graph chart to research and decides when to trade. If you think price will go up, you buy and if you think price will go down, you sell. Here’s a little illustration showing the EUR/USD pair.
As you can see the general direction here is that price is going up against the dollar, therefore you buy into the Euro and take your profits. If price starts to move down; you SELL, or go short and take your profits. Instead of buying into shares like stocks, you buy into Lots and that determines how much profits you take if the price starts to move in your favor.
That is the technical side of it, but as you dive more into it, you’ll realize that it’s much more than that. There are different methods of how to get in and when to get out of the market. One site that I recommend is Babypips.com. This is where I learned the ins and outs of how this particular market works and how you can take advantage of it.
How much money can you make?
It’s true that it takes money to make money and Forex is no different, there are professional traders out there who are making $5,000 to $10,000 or even more every month. However, if you’re a small player you can start out with as little as $2 with certain brokers. Yes, you can trade even to the pennies. So the answer is how much you want to make depends on your level of confidence in the market, how much time you’re willing to put in to learn the market, and of course, how much money you’re willing to put in to start trading.
Differences between stocks and Forex
With stocks, there are so many to choose from it can be overwhelming to new investors. With Forex, most traders only those 4 major currency pair mentioned. Isn’t it easier to follow and study 4 pairs than to study hundreds?
Forex is 24-hours market 6 and 1/2 days a week, meaning you can trade anytime you want except after Friday 4:00PM EST until Sunday 4:00Pm EST. You have plenty of time set your hours to trade without having to worry about market closing every day like stocks.
Is it worth trading?
Definately. It’s not something to be afraid of but it’s not something to be taken lightly. If you want to venture into this particular market, you have to put the time in to how it works. The idea is simple, the potential rewards are great but once you jump in; there are many factors influencing your decisions on making the first move.