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Do you wish to become a Forex Trader?

Do you wish to become a Forex Trader?
May 27
13:07 2014

The Forex trading journey you are contemplating is complex enough, akin to gambling, and some experts advise against potential hazards. The largest financial market worldwide has dealings like $4 trillion each day. The story of a trader could very well be rags to riches or riches to rags because of high reward, high loss scenarios. Besides, everything happens virtually over the internet and that adds to the quaint mystery.

The Forex bets on pairs of currencies and some important pairs are the US dollar/Japanese yen and the Euro/US dollar. The foreign exchange trading is a child of the internet and took off only as recently as in 1996 with the global spread of the web. Forex trading existed earlier too but was restricted to large financial institutions like banks that controlled the infrastructure.

Is training necessary to acquire the skills of Forex trading?

The answer is a resounding ‘yes’ otherwise it would be betting in a fool’s paradise. Online training courses as well as physical academies would groom the potential trader with the software and hardware of the forex business. A long and complex financial and trading history across the continents would reveal awesome secrets. We are constantly learning lessons from the past. The important point to remember is that there exists no governing authority in Forex trading like a bank manager that would have simplified matters. Agencies do exist and they enroll you and provide technical knowhow but you have to be on the guard against unscrupulous agents.

The first lesson for you is the ‘pip’ or the smallest unit of measurement for currency values.

The beginner should trade warily on small amounts following safe policies on the way to gathering experience. It would be best to set limits on losses before calling it a day. The trading software can be so set that it switches off when currency values reach certain negative dimensions. So there exists a safety mechanism like the fuse that blows to protect the circuit.

What is Forex trading exactly? Is it all that intricate?

Forex is simpler as compared to stocks and shares that present mind boggling densities of companies struggling away daily in financial markets. Can you believe that 80% of the forex trade revolves around six currencies? They are the US and Australian dollars, Japanese yen, British pound, the euro and the Swiss franc.

Forex has no central limiting authority like a government or a reserve bank but works through millions of units that traffic with each other. The chief exchanges exist at five international locations- London, Singapore, Hong Kong, New York and Tokyo.

How does trading take place?

Traders work from the desktop or smartphones and tablets too through specialized software that keeps them in touch with the Forex market fluctuations around the globe. Meta Trader 4 is one such automated online Forex trading platform that works through the internet. The software monitors the market with inputs from around the world. Expert Advisors can be programmed to keep a check on your automated trading. The Stop Loss system guards against losses beyond a certain set point. You get to trade even during travel with the study of financial markets and technical analysis. Almost everything works through automation that effectively means that the software is trading on your behalf and earning even while you sleep!

Brokers crowd the internet periphery with glowing promises and differing terms and conditions. They prompt the download of software and provide the necessary inputs to trading. Teaming up with a reliable broker is recommended at the early stages.

Always remember that currencies are limited in number and the charts update you at a glance as to the relative values. The Forex never sleeps either except during weekends but is an ongoing process that works round the clock, moving in the direction of the sun. The Asian market figures first, followed by Europe and America and back to Asia again.

Depending upon the forces of demand and supply, two kinds of exchange rates exist- the fixed and the flexible. The government buys large currency reserves in order to maintain the fixed rate. When the value of the currency rises, the bank releases large quantities of currency to preserve lower values. If demand for the currency falls, the government buys large amounts of currency to prop it up.

The other option is flexible currency rates. Every trader wishes to posses the higher currency. The graphs indicate a constant rise and fall of currencies working with currency pairs all the time. An instance is the American dollar pitted against the British pound.

What factors determine currency rates?

Social, economic and political factors coalesce to result in fluctuating currency rates in a volatile liquid market with high leverages. If fortunes can be quickly made with clever farsighted trading, the opposite is also true that losses could multiply. Business events like manufacture of electronics or political events like conferences besides communal clashes could impact the rise and fall of currencies temporarily or in depth for quite a while. Inflation reduces the value of a currency too with lessened buying power.

What are the dangers of currency trading?

The only problem appears to be that currency values could suddenly fall entailing large losses. That is exactly what happened in the 2008 financial crunch when the US dollar suffered and other currencies like the yen had been converted to US dollars. Don’t forget that America suffers the highest debt margins. It is certainly the wrong policy to work with debts.

In the carry trade, traders sell currencies with low interest rates like the Japanese currency and buy higher interest rates like the Australian currency.

It would be wise to trade small amounts on several currency pairs instead of putting all the eggs together, exposed to greater risk. Like gamblers in night clubs, be certain that you have the potential to suffer the loss of the money that you have traded. Trading when very tired is advised against and a beginner certainly needs a mentor. Researching is essential, the more the better. Agents who provide huge returns cannot be trusted. Learn to trade safely and well. Happy Forex trading!

 

 

 

Do you wish to become a Forex Trader? - overview
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Jadenforex

Jadenforex

Articles on the Jadenforex blog written by "Jadenforex" include guest posts, and items written in collaboration with several authors.

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