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  • Foreign Exchange Trader – How to Learn It

    Foreign Currency and CoinsAnyone can Learn to be a Foreign Exchange Trader

    Being a forex or foreign exchange trader no longer means you have to work for a bank in one of the world’s financial centers. These days you can trade on your own behalf, from anywhere.

    Since the rise of the internet many people are doing this from their own homes, making money in their spare time or even making a full time income. But what is forex trading and how does it work?

    Dealing in Currencies

    A foreign exchange trader deals in currencies. He or she will sell one currency that seems to be falling in value, to buy another that seems to be rising. There are always two currencies involved in a trade (a currency pair) because when you want to buy dollars you have to have another currency to exchange for them.

    In the beginning it is best to be involved with just one currency pair. Most people start out trading in the EUR/USD market, that is the euro against the US dollar. This is the biggest forex market. There is plenty of information available for this market and it tends to have lower costs and be relatively stable.

    Nevertheless forex is a very volatile market. This means that the prices can rise and fall steeply and quickly. The risk is high. It is easy to lose money. In fact, some losses are inevitable, so you should manage your account so that you never risk too much on one trade. You can use stop losses so that your broker will automatically sell if the price goes a certain way against you. The aim is not to have no losses, but to make sure that your profits are higher than your losses so that you end up with a net gain.

    It Takes Time and Concentration

    You will need access to a computer with a high speed internet connection any time that you want to trade. Unless you use a robot to control your currency trading, you will also need time where you can concentrate on learning a profitable system and then on trading itself. You pretty much need to be able to lock yourself away in a room to do this, at least for a couple hours a day. It is no good trying to trade from your desk at your day job with your boss interrupting you, or using a computer in the family den with kids climbing on your knees wanting to play games. You must be fully concentrated on the movements in the market or you could miss the right moment to either open or close a trade.

    If you are a cautious person who likes a solid investment with predictable low returns, you should not become a currency trader. Forex traders are people who enjoy risk and love the challenge of trying to turn a profit in a fast moving market.

    It helps if you are strongly focused on your goals and not easily swayed by emotion. It is important not to let fears of losses or dreams of huge wealth divert you from your strategy. You also need to stay aware of financial news, not only in your own country but in all of the major world powers, because this will affect the forex markets. With these characteristics and a good trading system in place, a foreign exchange trader can reap substantial gains from his or her investment.

    An excellent inexpensive program to learn how to be a foreign exchange trader can be found here.

  • Forex Margin Trading: Get More Money With Leverage

    Forex Margin Trading Gives You Tremendous Leverage

    Forex margin trading is a way of applying leverage to increase the purchasing power of your money. Leverage simply means using a small sum to control a much larger sum. This is possible because it is unlikely that the value of a currency will change by more than a certain percentage over a short time. So you can place a few hundred dollars in your brokerage account to trade on the margin – the amount that you think the price will fall. Your broker will in effect lend you the balance.

    95. How Trading on Margin Works
    www.informedtrades.com A lesson on what trading on margin is and how this applies when trading the forex market. For active traders and investors seeking to learn how to trade the currency market.

    Trading on margins is also known in stock and futures trading, but because of the special nature of currencies, you can get a lot more leverage in the forex market. Depending on your broker’s terms, you may be able to control 50, 100 or even 200 times your account balance.

    This can lead to big profits if you are successful, but it can also mean big losses if not. In general, the more leverage you use, the more risky your trading is. That is the nature of forex margin trading.

    We can understand leverage and margins if we consider an example.

    Imagine that the current rate on the British pound to US dollar forex market is shown as GBP/USD 1.7100. So to buy one British pound you would need $1.71. If you expected the value of the dollar to rise against the pound you might decide to sell enough pounds to buy $100,000. If your broker used lots of $10,000 each, this would be 10 lots. Then you would sit back and wait for the price to go up.

    A few days later you might find that the price had moved to GBP/USD 1.6600. Sure enough, the dollar has risen and the pound is now worth only $1.66. If you sell your dollars now and buy back into pounds, you will have made a profit of 2.9% less the spread. 2.9% of $100,000 is $2,900, so that would be an excellent trade.

    But most of us do not have $100,000 spare cash that we want to trade on the currency exchange market. So here is where the principle of forex margins comes into play.

    Hint: Sign Up For a Demo Account to Understand How Leverage Works

    Since you are buying and selling different currencies at the same time, your own money only has to cover any loss that you might make if the dollar falls instead of rising. And you would put a stop loss into place to limit that loss, so $1,000 might be all you needed to have in your account to make this $100,000 purchase. Your broker guarantees the other $99,000.

    In fact many brokers now operate limited risk amounts where the account will automatically close out the trade if whatever funds you have in your account are lost. This prevents margin calls which can be disastrous for a trader because they mean that you can lose more than you have. But with a forex limited risk account that is not a possibility. The broker’s software that you use to control your account will not let you lose more than your account balance.

    Using leverage in this way is so common in currency trading that you will soon do it without even thinking about it. Still it is important to keep in mind the risks of forex margin trading. Lower leverage is always safer and you may never want to go to the maximum forex margin that your broker would allow.

  • Foreign Exchange Markets: What You Must Know

    The foreign exchange markets are situated all around the world. Currency trading is a global activity. Every country in the worlduses money and needs to change that money into other currencies in order to trade or interact with other nations.

    Currency exchange happens at every level of society. As an individual, you may have changed money when traveling on business or on vacaation. Or maybe you have sold something on eBay to somebody in another country. Their payment comes in to your account in their own currency, and the bank or other payment processor such as PayPal changes it for you. That is currency exchange at the root level.

    How to Capitalize on the Foreign Exchange Markets

    Foreign exchange or forex trading has a different purpose, however. When you are trading on the foreign exchange markets you are not buying another currency because you need it. You are buying it in the hope that it will rise in value, so you can change it back and end up with more money than you started out with.

    Of course, it is risky. The price movement could go against you and then you would end up with less money instead of more. So you will want to gather plenty of information about currency trading before you start.

    A Little Background

    Forex trading began in the 1970s when the major currencies were deregulated so that their values were no longer fixed. The banks and large investors quickly saw the potential for making money from the changing prices.

    The main forex marketplaces are the big financial centers of the world. London sees the highest activity with New York second and Tokyo third. Other major players are Sydney, Zurich and Frankfurt.

    Originally you had to be in one of those places to trade money, or at least have a telephone connection with a broker who was there. It was very difficult for somebody who was not on the spot to act fast enough to react to the sudden fluctuations in price that can happen in the forex markets.

    Welcome to the Modern Age of Forex Trading

    But modern advances in technology have changed all of that. Since the rise of the internet it has been possible to trade on your own account from anywhere. This means that it has become easier and easier for the little guy to get a piece of the action.

    While some people never think about foreign currency from one overseas trip to the next, others are studying charts and financial information or even using automated software in the form of forex robots to make money from the rising and falling prices with the aim of becoming financially free by trading on the foreign exchange markets.

    If you would like to know more and learn a strategy that the banks use to trade forex try this.