Bliss & Heartache: The Reward and Risks of Forex Trading

FX, or FOREX, stands for Foreign exchange, and it is the name of the market the used to trade the world’s many currencies. The primary traders of Forex markets are all the major banks and corporations, which trade billions of dollars each day. Because the top three currencies that are most traded on the Forex are the US dollar, the Japanese yen and the Euro, the major trading centers for Forex are London, New York, and Tokyo. These pairs are always against the US dollar and the main crosses you will find when trading forex are the USD/EUR and the USD/GDP. Because of this, Forex investors are generally well informed about the market and understand the current situations in many countries of the world. Currency prices on the Forex are affected by the forces of supply and demand, which in turn are affected by economic conditions. This is especially true for developing countries where the fluctuations of the forex are much higher. The uses of technical analysis and fundamental strategies in forex are much the same as other markets: price is assumed to reflect all news, and the charts are the objects of analysis. The past trends in the Forex are also taken into consideration, but are not the only thing that is looked at when forecasting this type of market.

Stock market forex trading glowing graph 1228037 Vector Art at Vecteezy

Both stocks and forex are considered as high risk/high returns business, but with Forex, stops are guaranteed to be filled, and your only risk is your initial margin deposit FXORO . In any market where a potential for profit exists, there exists also a risk of loss, so you need to learn to manage the risk before trading in the forex market. Although, almost every kind of investment involves some risks, the risk of loss can be substantial while trading off-exchange forex contracts. Because it is speculative in nature, you can lose all of your investment, so the golden rule must be: don’t risk what you can’t afford to lose. But, thankfully, there are some safeguards to help minimize against these risks. The ability to customize the size of the trade will allow you to have a better risk management of your money, and the most common risk management tools in forex online trading are: the limit order and the stop loss order. So, whenever you are taking a risk on the FOREX market, so you have to know your limits and what you can afford to lose.

The mechanics of FOREX trading are very similar to currency futures, except for the way in which currency pairs are quoted. Technically, Commodity Futures and Forex are both gambling, because these activities don’t create wealth and are purely speculative. But the advantages of trading the Forex are numerous when compared to all the other investment methods. Some of the advantages of FOREX are leverage and margin, and the turnover rates are nearly thirty times larger than the total volume of equity trades in the US. The leverage ratio in the Forex is much higher than equities because, although the positions traded in are in units often in the thousands, only a small fraction of the total comes from the investor. Also, transactions in the Forex are traded very rapidly, as most of the trades in Forex are held for less than 7 days. But, the forex are much more volatile which can be very dangerous to the novice trader.

The primary traders in the Forex market are the major banks, who trade billions of dollars each day and some of the biggest trading are Bank of America, Morgan Stanley, Goldman Sachs, First Boston, and HSBC. Most of the major players in forex are large banks, insurance companies, heck even GM has their hand in the jar. Trading Forex are one of the most exciting and rewarding markets to trade today.

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