Forex, with its operations running 24/7, is the most active and largest financial market in the world. Being one of the most dynamic financial industries, it provides hopes and opportunities for all kinds of traders today. In the beginning, it used to be an area of interest for banks and institutions only. However, Fuad Ahmed, a Forex trading expert and analyst, explains how the demand for forex trading has exceeded from the corridors of big financial institutions and reached the doorsteps of the common man today. Fuad Ahmed further enlightens his readers about some of the things they should definitely know about forex trading.
1. What is Forex Trading?
Forex stands for Foreign Exchange and Forex trading is the purchase of one currency against the value of another currency, with the hope to gain profit in return from the difference between the values of the two currencies.
The rates of Forex are never stagnant; they perpetually undergo a change which enables the trader to make profit or lose money in the trade. Since it’s the value after decimal like 0.004 which measures the change occurring in the value of forex, a layman often fails to read the difference, but a trader knows it well. The perpetual change coming in the value of currency after the decimal is the guaranteer of profit or loss to the trader.
2. Buy Low Sell High.
The basic idea of forex trading is making profit from the difference in values of two currencies. The main concept is to buy a pair at low price and sell high to gain profit from the change. For instance, if a trader buys a pair of USD/EUR at 1.002 and sells at 1.024, he would definitely make some profit from the margin in the price difference. An investor aims at availing even the smallest profit he is getting from the base price that he purchased the pair for.
3. Trading is a Game of Emotional Composure.
Forex is a very profitable business; it can even make an investor a millionaire if it is done using the right techniques. However, there are many risks of failures involved in the
business too. It’s very important that a trader knows how to keep his emotional health stable after facing a downfall in trading.
It’s of integral value that a trader knows his attitude and studies his mood patterns before entering into trading. If he finds himself capable of bearing the loss, there is a long way to go for him. But, if he gets dejected from even a small blow, he can possibly never succeed in forex trading. So, keeping oneself composed is the key to becoming an achiever in the Forex market.
4. Does not Require you to Go by Book.
There are many books available in the market about forex trading, but no matter how many books a trader reads, it’s the real trading experience that teaches an investor the most appropriate ways to trade.
5. Money is Needed to Make Money.
Forex is all about money; whether it is the exchange of currency or use of it for the purpose of trading. One needs money to invest in a pair of currencies. An investor should always have a fine idea about how much money he can put in the business and also about the amount of money he can bear to lose.
6. You don’t Become a Millionaire overnight.
Many traders enter the field of forex trading with a misconception that it can make them millionaires in the first go. There is no doubt that forex can easily make its traders make profit of millions in a short span, but it does not happen in a day. A trader needs to realize that it does not happen in a span of a day that he starts generating profit; rather it takes him a while to start making money out of the trade.
7. It is a 24/7 Market.
Forex is the most active financial market in the world that works 24/7. The forex market technically operates 24 hours of all 5 days of the week but, because of difference of time zones in different currency markets in the world, the trading market remains operational 7 days a week.
8. Largest financial market in the world.
Being the largest financial market in the world, forex provides great liquidity to its traders compared to that of Stocks or Futures. It is the most profitable business among all other kinds of trades.
9. Forex Trading Platforms.
The advent of technology like all other areas has influenced the field of Forex too. It is providing many options like online Forex trading platforms to both the investors and brokers, making forex trading faster, more profitable and less time consuming.
Image source: netpicks