The daily turnover in Forex trading is more than 4 trillion dollars. Trading is open 24 hours a day Monday to Friday. With that amount of money changing hands on a daily basis, surely there are opportunities to make money. You have heard of stories about people who made a ton of money so it must not be that difficult. How then one goes about trading in foreign currency? In theory, everybody can buy and/or sell one foreign currency against another. Again in theory, foreign currency trading is the buying and selling of currency pairs and making money when there is a favorable change in the exchange rates.
Let us dispense with the discussion of interest rates, inflation factors, political situation, domestic productions, unemployment rates and other foreign exchange trading determinants. These are complex economic factors that are beyond the purview of the ordinary individual and better left to the economic managers. At any rate, the end figures are regularly released by government instrumentalities and are publicly available online. What you should be interested in is the steps to take in order to trade in foreign currency.
Foreign exchange trading is done online. You can use your current computer with internet connection because you will not need a special one. If you travel a lot, you will need a laptop. A dependable Smartphone is also an option, especially since you can get a cell phone signal almost everywhere. The first step is to open an account with a currency broker. For this, you will need an initial trading capital. How much you will need is really a matter of conjecture because it will depend on many factors. You can get started with a minimum of a few hundred dollars or several thousand if you have the means. Just don’t trade with all of your money because you will be literally trading the shirt on your back. The currency broker is the middleman who buys and sells currencies in your behalf. You cannot buy and sell currencies on your own because only entities with a license like the Forex broker can do business on the market.
With a Forex account, you can buy currency pairs at the spot market and when the time is right, sell at a profit. The right time to sell is when the prevailing exchange rate of the currency purchased is higher than the exchange rate when you bought it. In effect, you bought the currency pair on the assumption that it will cost higher at a later time. If you are wrong in your assumption, then you lose. The spot market is where you trade one currency against another, with the delivery occurring within a two day period, the time it takes to transfer funds from one bank to another. The price you paid is the ongoing exchange rate at the time of purchase, relative to another currency. To illustrate, you will pay US$1.288 to buy €1 if it is the ongoing exchange rate. Once you have your Forex account, you can choose the currency pair you would be buying. The most traded currency pairs are the Euro/US dollar (USD), the British pound sterling/USD, USD/Japanese Yen and the USD/Swiss Franc.
After you have made a few transactions, you may have realized that trading is not a walk in the park and that you have to learn many things. Above all, you still have to acquire the insight and acumen to make a profit on a regular basis. So you spend more time learning about the ABC of the business by reading websites, buying systems, and experimenting with different methods to see what will work and what will not.
Some good things about foreign exchange (forex) trading is the fact that while it is open 24/7, you can choose to work only on specified hours. You can therefore make a career out of foreign exchange trading by working full time, or trade only on a part time basis on your own schedule as a means of earning a supplemental income. You can work at home or while on the move and leisurely at your pace. You don’t have to do any documentation, secure permits and licenses, set up shop or rent space, buy office equipment and furniture, hire people and keep a watch on things.
To invest and trade in foreign currency is a risky business, and you have as much chance of earning a profit as losing money. Once you have decided to engage in this activity, decide and fix a limit to losses that you can afford. That would involve defining your objectives and adapting a strategy for that attainment of that objective and to limit possible losses. The thing to avoid would be to try to make up for your losses by doubling your next transaction. It is possible that you will come out the winner, but it is more probable that you’ll just be doubling your losses.