Introduction to forex
The forex market have many similarities with the stock market, but there are also several differences. This article will show you those differences and get you started with online forex trading.
Why trade forex online?
Even if trading with currencies started as a way to purchase foreign goods and services, the majority of forex trades today are of speculative nature. Many smart investors have learnt how to earn money from online forex trading. You can, too.
The forex market the financial market giving most possibilities. The daily trading volume from central banks, corporations, hedge funds and private investors exceeds several trillion dollars a day.
Online forex trading are exciting and with the right guidance you can earn big money on small movements in the currency pairs.
Some of the biggest advantages with forex trading is:
- Low spread
- No courtage
- High liquidity
- Technical analysis works
- Often long and predictible trends in currency pairs
Currencies move less then stocks
In contradiction to stocks, currencies normally move less in percentage, both in the long and short run. Over 2 % daily adjustments are not common in forex trading.
In order to adjust for this, it’s possible to leverage your currency transactions. Some forex brokers offer 200 or 400 times leverage of your initial deposit. However, it’s very important to not use the leverage too much, otherwise you can quickly lose your money. But sensible used, leverage of your forex positions can be very profitable.
Currencies are trades as pairs, without comission
Currencies are not traded like stocks, one and one. All currencies must be traded against another currency, such as the Sterling against the US Dollar (GBP/USD).
Further, there are usually no comission when trading forex and the difference between buy and sell rates are normally minumal (0,005 % or less).
To predict the movements in the forex market
In order to succeed earning money on forex trading you need to understand what drives the foreign exchange rates. When forex traders should analyze currencies and predict their future movement, they usally consider:
• Interest rates
• Economic growth
• Political risk
• Trade deflicit and capital flow
• Technical analysis
If you can predict some of those factors, you can earn some serious money rather quick. Make sure to put an eye on the forex news blog and read daily about the upcoming economic events effecting foreign exchange rates. A risk-free way to start is to open up a forex demo account.
However, if you cannot be bothered to look into all the factors listed above, you can use automated forex trading robots.