Forex Trading

How to Profit From Forex Trading

Forex, also referred to as the currency trading market is, undisputedly by far, the largest and fastest growing market in
the world. Its daily turnover is estimated at 4 trillion dollars, which is more than 100 times greater than the NASDAQ
daily transaction amount. Markets are, as we know, places to trade goods. This is no different with the FOREX market.

The Forex goods (or merchandise) are the currencies of various countries. You may buy Euros, paying with U.S. dollars, or you can sell Japanese Yens for Canadian dollars, etc. There are currently 15 currency pairs that are traded.

How does one profit in Forex?

As with all stocks, the answer is always the same and simple and obvious: buy cheap and sell for more! Profits are generated from the fluctuations (changes) in the currency exchange market.

The nice thing about the FOREX market is that regular daily fluctuations, say - around 1%, are multiplied by 100! (in general, trading ratios are from 1:50 to 1:200). If, for example, the exchange rate of "your" pair of currencies increased by 0.6% in the last 4 hours, your profit will be 60% on your investment! Such can happen in one business day, or in a few hours, even minutes. Moreover, you cannot lose more than your "margin". You may profit unlimited amounts, but you never lose more than what you initially risked and invested.

You can implement your choice (the pair of currencies, the volume amount) under any direction to which the market is moving, and yet make profit. It does not matter whether the exchange rate is going up or down: you can always decide to buy Euro and sell dollar, or vice versa - buy dollar and sell Euro. You don't have to physically possess certain currencies in order to perform "buy" or "sell" with them.

How do I start?

You start the trading process by first registering with a Forex trading broker and deposit your first trading "margin" amount (most brokers also accept credit cards) and then start trading. It's as simple as that. Some brokers even provide you with 1-on-1 training and service, as much as necessary.

How do I trade Forex?

This is the most important part - the selection of pairs of currency. A good rule of thumb we have heard before: "Buy and Sell what your broker is". You select the pair of currencies with which you wish to make a Forex deal. You determine the volume (the amount of the deal). You deposit the "margin" (collateral needed to facilitate the deal. Usually - only a very small portion of the whole deal, say: 1% or 1:100).

Before you finally activate the deal, you can still "freeze" it for a few seconds. That enables you to either change the terms, or accept it as is, or altogether regret the whole idea. When your Forex deal is running (you hold an "open position"), you can monitor its status and check scenarios online, whenever you wish. You may change some terms in the deal, or close it (and cash the profit, if any, or minimize the loss, if any). You can determine a "take-profit" rate, with which the deal will close automatically for you, when and if such rate occurs in the market. Meaning: you do not have to stay near your computer when you hold open positions.