All over the world people use different currencies to get by in their everyday lives. Most people only ever use the one, and only develop an interest in another one when it comes to vacation time.
But for some people the world of currency has a daily fascination that could make them money. While it is one of the riskiest ways to try and make a profit, the world of foreign exchange trading otherwise known as forex has an undeniable attraction that appeals to a lot of people all around the world.
So what exactly is Forex all about?
The idea of buying or selling money might seem a little strange to some people, but in reality it is not much different from buying a foreign currency to take on vacation with you. The only difference is that you are effectively betting on how that currency will perform, in the hope that you will be able to sell what you bought later on at a higher rate.
While the principle behind the foreign exchange markets is relatively simple, taking part in it in reality is a lot harder. Forex is notoriously risky to get involved in, and while it is possible to make a lot of money it is also more than possible to lose a lot, which is why it is always a good idea to find some websites that will teach you the ins and outs of the market before you get started for real.
How do I learn how it all works?
There are plenty of websites online today that focus on Forex to the exclusion of all else, but it is important to find the right one for your own needs. Some are aimed directly at those who are already trading or at least have some experience in doing so, while others have more in the way of help and advice for beginners to benefit from.
If you are new to the world of Forex, make sure you find a handful of websites that have help or education sections that will show you step by step how to get started. You will also find that many of the websites that offer trading facilities also offer free demo Forex accounts that enable you to try out some strategies and place ‘virtual’ bids to see how it all works, before you sink any real money into it.
When it comes to getting involved for real, it is always a good idea to make sure you only use money that you don’t mind losing. Of course no one wants to lose any money if they can help it, but the element of risk involved with Forex means that you would be foolhardy to risk any money you could not afford to lose.
Which currencies are traded?
The short answer to that is any of them! There is no limit to which currency pairs you can focus your efforts on. A currency pair is literally two currencies –one is the currency you are selling, and the other one is the currency you are buying in return.
When you see two currencies written next to each other – such as USD/JPY for example – the first one is known as the base currency and the second is the counter currency.
Over time you will become familiar with the terms and phrases used in the Forex markets, but it is a good idea to get to know as much as you can and use a demo account to get started, so you feel more confident when you finally buy your first currency.
Do I need any special tools?
There are plenty of charts and calculators that will help you to better gauge the possible outcome of a bid you might place in the future, and these can be found on all good Forex websites.
A profit calculator will certainly come in handy since it allows you to work out how much money you would make assuming certain buying and selling exchange rates were in effect. This helps you to set a certain level at which you would be prepared to sell to make your profit, and by looking at how the exchange rate between those two currencies has performed over recent days and months, you can judge whether or not it would be a good bet.
Any website which can provide the current exchange rates, Forex charts and other types of calculator (such as the Fibonacci calculator for example, which you will no doubt come across eventually) would be a good one to bookmark for later use, because once you start getting involved in the foreign exchange markets you will find that you’ll need them frequently.
How much money do I need to be able to use to start trading in the Forex market?
This depends on which Forex broker you get involved with. All the websites that you can get started with have a minimum account balance, so choose the lowest you can find and go with that.
The real key to success is to start small and build up gradually. Be prepared to lose money on some occasions – no one ever succeeds with every deal and you may lose more than you make initially. Never forget that there is a big risk factor involved in dealing with currencies that change almost by the second, so be prepared to lose before you get involved.
That’s not to say it isn’t possible to make a decent amount of money from the Forex market however. In many cases the people who don’t succeed are those who don’t take the time to research what the market is all about and therefore go into trading without the knowledge they need. The difference between knowing what you are doing and not having a clue can be a big one when it comes to the foreign exchange markets – and it can be a costly one too.
So do your homework, learn how to use the calculators and read the charts, and play with virtual money before you even consider using your own cash. Then you will stand the best chance of making a great start in Forex.