Hi there! If you’re reading this article, then that must be because you want to learn of Forex Market. Unless you live under a rock you have likely seen ads promoting forex trading. The ads make it seem like trading currency is easy money that comes with little to no risk. In reality this isn’t the case. While it is certainly possible to make money with forex it is neither easy nor risk free. As long as you go in understanding that currency trading can be a great way to increase your wealth. Just remember that it should only be a small part of a well balanced portfolio of financial investments.
The forex market is where currencies get traded and it is by far the largest financial market in the world. Every time that somebody wants to buy something that is made in another country they need to exchange currency and that is done on the forex market. Given how much international trade goes on this is obviously going to be a huge market. In fact billions of dollars gets traded every day. That means that there are plenty of opportunities for currency traders to make money from fluctuations in exchange rates.
The first thing that you have to keep in mind if you are going to get involved in the currency market is that it is not an investment. An investment is something that you buy and hold onto while it increases in value. Forex is something that you actively trade; you don’t buy it and hold it. As long as you keep that in mind trading currency can be a very profitable endeavour. This is in part because of the size of the forex market but also because of the power of leverage.
Leverage allows you to buy currency by putting down just a fraction of the amount you want to trade, usually just one percent in the currency market. That means with a thousand dollar investment you can trade a hundred thousand dollars worth of currency. Obviously this can be very profitable but it also means there is considerable risk.
One of the other great advantages of the currency market is that unlike other financial markets the forex market is open twenty four hours a day. A lot of people find being able to trade at any time of the day to be convenient but it also means that once you have taken a position you need to be able to monitor the market twenty four hours a day. This is why automated trading has become so popular in recent years.
One thing that you will often hear about the forex market is that there are no commissions. Technically this is true but it really just means the broker gets his money in a different way. When you trade currencies there will be a difference between the bid and the ask price and the broker will pocket this difference in order to make his money. Since this money comes out of your pocket it is in all practical terms the same as a commission.