Trading forex is mastering the art of short term speculation through buying and selling different currencies against others. In ForexSQ we care about traders’ education, therefore we remind that forex trading is far more risky than you can imagine when you first come to it and could imply large losses for the newbie. Why not? All of the publicity surrounding FX trading suggests that it's an easy way to double, triple your money from the comfort of your home and with little effort.
But that, of course, is not true. Indeed, anyone can become a profitable forex trader, if he/she pays the price: study. To become a doctor, a lawyer, an engineer, or any kind of profession by the case, you need to study for years. Why would you think that you don't have to do the same to become a successful trader?
Anyway, forex trading is developed through the foreign exchange market, which has no physical place. It´s the result of worldwide transactions performed by banks, central banks and commercial business, which means is active 24 hours a day, and pretty much 7 days a week. If you are new to FX, you may hear that is usually called an OTC, over-the-counter market, which means that trading is done directly between two parties, without any supervision of an exchange, although that is not completely true. To trade forex, you need a brokerage firm, usually called just "broker," that grant you access to this worldwide net.
Retail forex brokers provide trades with access to this market through a trading platform that allows them to buy or sell a certain currency against another. In fact, these days, brokers offer much more than just currencies, adding commodities, indexes, and other assets to their platforms, to provide their clients with more investment opportunities. They charge a small commission for their service, through the spread between the selling and buying prices. There are plenty of brokerage firms, with different degrees of reliability, although is good to know that as time goes by, there are less scammers around and that many countries have regulated the forex activity, to protect broker's customers.
Among one of the major advantages with forex trading, is the use of leverage. The use of leverage implies the possibility of having a significant increase in returns when taking a certain investment position, but of course, the losses can also be as large. In simple words, it means that you can buy certain assets, by using less money that what it's worth. For example, if a broker provides a 50:1 leverage, also called a 2% margin requirement, it means that $2,000 of equity is required to purchase an order worth $100,000.
The election of the correct broker is as relevant as educating yourself before jumping into this activity. Brokers offer not only different assets, but also different leverages, and have different minimum capital requirements. So basically, when you choose a certain broker, the firm creates a segregate account at your name within their company, where you have to deposit your money to trade. Some allow to open accounts with just $500.00, while most required $10,000.00 to open an account.
It could be very lucrative, but you should not forget this is speculation, and the risk correlated with it is quite important. But again, performing an open heart surgery is not what you could call easy, even for an experienced surgeon. As with any profession, practice does the master.
Risk Disclosure Analyzing your financial situation, you should decide whether you should start Forex trading or not. Rates of currencies can go down or rise higher any day, any hour, any minute so you should risk only that much which you can afford to loose.
Editors’ Picks
EUR/USD retreats below 1.0700 after US GDP data
EUR/USD came under modest bearish pressure and retreated below 1.0700. Although the US data showed that the economy grew at a softer pace than expected in Q1, strong inflation-related details provided a boost to the USD.
GBP/USD declines below 1.2500 as USD rebounds
GBP/USD declined below 1.2500 and erased the majority of its daily gains with the immediate reaction to the US GDP report. The US economy expanded at a softer pace than expected in Q1 but the price deflator jumped to 3.4% from 1.8%.
Gold drops below $2,320 as US yields shoot higher
Gold lost its traction and turned negative on the day below $2,320 in the American session on Thursday. The benchmark 10-year US Treasury bond yield is up more than 1% on the day above 4.7% after US GDP report, weighing on XAU/USD.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.
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