Forex Trading Advice – Are You Ready to Take the Risk?
Forex trading involves borrowing money from a broker and putting up a small amount of capital. This type of trade carries a high degree of risk. If the currency’s value moves in the wrong direction, the trader will lose the money. A standard forex account allows a trader to trade up to $100,000.
The forex market trades over 5 trillion U.S. dollars each day. The exchange rates fluctuate based on demand and supply, which means the higher the demand, the higher the price. This volatility can be caused by news, world events, and other uncontrollable factors. Generally, however, changes in forex rates are small and a majority of traders hold their positions for only a few hours or even a day.
Whether or not you are willing to take on this risk is entirely up to you. Some investors are more risk-averse than others, so it’s important to learn the ins and outs of forex trading before jumping in. Before you begin, though, be sure to research your forex broker. You’ll also want to consider how much protection they offer in the event of a market crisis or the insolvency of a dealer.
Currency trading is similar to stock trading, only in forex, you are speculating on the value of a foreign currency, or ‘currency’. As with stock trading, you’ll want to buy currencies that are likely to rise in value in the future, and sell them if they go down. The primary market for forex trading is the spot market, which is where currency pairs are exchanged in real time.