Is Forex Trading For You?
Many people are curious about Forex trading. I am curious about it myself. I have been investing in stocks, but not into foreign exchange. Both can be intimidating, but forex even more so since the foreign exchange is more volatile than the stock market.
Would foreign exchange be for everyone then? Is forex trading for you? That is what we will find out here. It does take a certain kind of person to go into the stock market and foreign exchange. This is most true if you are trading and not simply investing. Before doing it though, you should know how foreign exchange works and what it entails.
Foreign exchange is very fast since fluctuations in currencies come at a fast pace. It is much faster than it is in the stock market. This is what makes foreign exchange trading having greater risks. You can make it big if you know what you are doing, and you can also lose big if you don’t know what you’re doing.
The first thing to know then is what exactly is foreign exchange? Simply put, foreign exchange is where currencies are traded on a daily basis. Many economies depend on currencies, and there is an exchange of currencies to keep economies afloat. This is the long and short of foreign exchange.
Today, foreign exchange is computerized. Transactions are done through computer networks around the world. This makes trading much faster, and which means trading would be much riskier as well since currency prices fluctuate almost every second. Anyone who is trading should be familiar with this. I check how my stocks are doing every week at least. For those into forex trading, you have to check on an almost hourly basis to find the proper time to go in and out of the trade.
Pros and Cons
One of the advantages of forex trading is that it is liquid. This makes trading easy then. It is easy to enter and exit a given position, which can be as much as a second. However, this is also its disadvantage. Since it is so liquid, it is volatile. Timing is important when entering and exiting a position since it can make or break a position if the timing is right or not.
Banks offer large leverage because of this volatility of the foreign exchange market. Traders then can hold positions with a little investment that comes from their own. Again though, going into foreign exchange should also mean knowing the risks involved with it, as well as knowing how the market works in general. A Little knowledge on how the market moves can potentially wipe out a trader.
One advantage that foreign exchange trading has over the stock market is that it is always on 24/7. This is because currencies are regularly used worldwide to run the global economy. A trader then can do transactions any time since there is no time that the market closes, unlike that in the stock market.
The bottom line in forex trading is that a trader must know first how the market works. It takes months to know what is going in and coming out of the market. Usually, beginners would have a mentor to guide them into forex trading, so as not to lose big.
How To Approach the Forex Market
There are two ways in which a prospective trader could approach the forex market. One is to see forex trading as a hedge, and the other is to see it as a means for speculation. Since I am more into stock investment, I would see forex trading the same way then — as a hedge. Forex as a hedge means that banks will lock in a rate for currencies. That would lessen the risks for traders who use it then as a hedge since they would be protected from the usual volatile nature of the currency market.
Most traders though, see forex as a means for speculation. That would mean actively buying and then trading as an active trader. There is lesser protection in this, though if a trader knows how it is done, then there is much more profit in it.
In order to meet the growing need for trained professionals in the field of International transactions involving varied currencies, IFBI has come out with an ADVANCED PROGRAM IN TRADE FINANCE & FOREX. It will cover the foreign exchange market, Cross border trade mechanism, currency conversion, payments etc. The program will help standardize concepts and practices relating to FOREX & Trade Finance in the learner. As a result of this s/he will be able to engage with clients, articulate domain well and carry out various functions in the field.
BENEFITS FROM THE PROGRAm
upon completion of the program, the learner will be awarded an industry oriented certification. The program will ensure entry in a field of specialization much sought after by bankers with higher possibilities for accelerated growth in career. The possibilities of an international career are higher due to the talent dearth in this area –especially in Indian banking industry.
Forex trading can have big potential if a trader knows the market well. However, there are more risks in forex trading as well. Forex trading then wouldn’t be for everyone, as it takes great risk and much bravery to be in the currencies market. That shouldn’t stop you from trying out forex trading though, but first, learn more about it. Good guides for it can be found here: http://www.investopedia.com/articles/forex/11/why-trade-forex.asp as well as this one: http://www.investopedia.com/university/forexmarket/forex1.asp. Knowing all about the foreign exchange market will go a long way in minimizing losses and maximizing profits.