With the advent of home trading via the internet the forex market has become a hot topic for those looking to augment their income or even for those who wish to start a new more lucrative career – but what exactly is forex and how did it come about in the first place? Today’s article looks at exactly these questions and aims to give useful advice for novice traders.
What is Forex?
Explained in simple terms forex (The Foreign Exchange) is a market place where currencies are traded. People from all round the world need to buy products and services from each other and in order to do this they usually need to pay in the local currency of the product or service provider. In order to do this companies buy huge amounts of currency in order to pay these deals – this can be considered the primary function of the foreign exchange.
However, there is also a second more personally invested set of people who use the forex market to generate profit, these people are called forex traders or forex brokers. Instead of buying a countries currency for the sake of procuring a product or service, the buy it in order to sell it on once its value raises and thus make a profit. A currency’s value fluctuates dependent upon the political and economic stability of the country which produces that currency – for example, the pound is fairly stable in value as Britain has a well-established system of government and a strong economy, however by contrast, Vietnam’s currency (The Dong) fluctuates hugely each day as Vietnam is less economically and politically stable. Traders make money by purchasing a large amount of a currency when its value is low and then selling it on once the value has risen.
Top Five Forex Tips
#1 – Forex trading is not gambling!
This might sound obvious but there are many novices who see forex in the same way they see betting on a race or playing at a casino. It’s important to remember that good forex trading is about establishing a strategy and sticking to it, using statistical analysis and doing research!
#2 – Follow the forex trend!
It’s always a good idea to follow the trend in forex. If a currency is going up in value then buy as much as you can safely risk, once the trend reverses and you see the value going down on your charts then it’s time to get – as they used to say in the 80s “Sell, sell, sell!”
#3 – Change your time frames!
It’s always worth looking at a larger time frame in order to give you a bigger picture of how your preferred currency is performing. If you normally look at a day then try looking at a week, if you normally look at hourlys then try looking at dailys.
#4 – Leave emotions at home!
This is particularly important in the world of forex. If you want to be a successful trader you need to stay clear and focused. If you last few trades went badly, don’t panic, take a look at your strategy by all means – but don’t just suddenly switch tactics – for that way lies death by forex. The same goes for when you’re doing well, even if you're making a profit, stick to your strategy – otherwise you’ll be kicking yourself once you start making losses.
#5 – Open a Demo Account.
Forex trading done badly is a brilliant way to throw all your money in the bin! Before you jump into real trading make sure you open a demo account which will allow you to test your strategies and tactics without risking any of your hard earned cash.
So that’s it for today folks, what more can we say except ‘Time To Get Trading!’
Richard Newman is a copywriter and poet with a bachelor’s degree in English Language and Creative Writing. He have worked in various marketing & creative roles since 2001. His aim is to publish at least one novel before he die – so far he have had 2 poems published internationally in print as well as some online. In his professional capacity he currently work for an advertising agency in London.