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Let’s start by giving you an appetizer. Global foreign exchange market is the largest market in the world. At a daily turnover of 3.2 trillion US dollars it stands tall and above the combined turnover of the entire world’s stock and bond market. So sky is the limit, take that fact as an inspiration to begin with.
Now here is the caveat: Foreign Exchange market involves a high degree of risk, including the risk of losing money. So invest only if you have the appetite to loose a major chunk of that money without loosing your sleep.

THE TERM FOREX:

The value of forex changes everyday. This is the premise for the forex business. There is a huge forex market where you can benefit from the movement of currencies. With the advent of internet and improving technologies, the forex market has become more accessible giving rise to a whole new generation of online traders. The biggest advantage of currency trading is that you don’t have to be a big shot money manager to trade, small time investors like you and me too can take part in this activity.

FOREX MARKET AT A GLANCE:

• There are firms out there which don’t even charge commissions – pay only for bid/ask spreads.
• The only market which is open 24 hours for trading
• Leverage available to trade.
• Unlike stocks, which can go to a count of 1000’s in a market, only few currencies exist, so choosing and analyzing currencies is easy.

THE METHODLOGY:

The trading mechanism is almost identical to stock markets. It’s just that stocks are replaced by currencies and you are buying one currency and selling another simultaneously. This is the reason you will always see the currency quoted in pairs. Example, EUR/USD.
EUR/USD implies the number of US dollar one EURO can buy. If you feel that Euro will increase in value vise a vise Dollar, you would buy more Euros with dollars. And as soon as the exchange rate rises, you sell back the Euros. The difference is your profit.

DON’T FORGET THE RISKS:

There is no doubt about the immense potential profit in forex trading. But please understand the risks involved clearly. Decide upon your objectives and your risk appetites before beginning One golden principal is that if you are a beginner or unsure of the market environment, always invest only that amount which even if you loose, does not create a panic situation for you. And keep on reading and acquiring knowledge, that would be your best bet in the markets.

This post was written by Karan Bhatia

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