The Forex Market

Forex Trading: Simple But Not Easy

The foreign exchange currency market, often called Forex, or simply fx, averages close to $4 trillion a day in activity.

It is an ideal venue for people who want to start a home-based business that does not require years of experience, huge investments of time and money or the necessity of traveling any farther than the nearest Internet connected device.

This is not to say that Forex trading is easy, but just that it is simple.

Once all the fabulous claims of fabulous overnight wealth acquired with minimum effort and unbelievably small monetary investments are disposed of, a very legitimate opportunity to supplement an existing income or replace one lost for any reason exists for those willing to treat the currency market with the appropriate respect and caution.

You already have most of what it takes to trade FX

This is the simple part.

There are only five essential elements required to participate in the currency market.

The first of these is a desktop or laptop computer. These need not necessarily be the latest thing, either. Most computers built in the last five years are more than adequate. Recently, Forex trading has even been made available via smart phones and tablets.

The second requirement is a reliable Internet connection, preferably of the high-speed variety. Currency prices can at times change very rapidly, and download speeds of 1.5 Mb per second should be considered the minimum.

The third thing will be trading software, commonly referred to as a trading platform.

Forex brokers typically make one or more trading platforms available free of charge to clients as an incentive to establish trading accounts with their brokerage firm. It is possible to spend large sums of money on elaborate trading software, but this is entirely unnecessary in the beginning.

The fourth item is a Forex broker.

This decision requires some time, patience and diligence. There are literally hundreds, if not thousands, of FX brokers competing for traders’ accounts. Finding a reputable broker that offers the ideal combination of elements such as low trading costs, a stable and easily navigated trading platform and effective trader educational resources is of paramount importance.

Unlike the stock and commodity futures markets which have been in existence for much longer and have had many more regulatory safeguards imposed on them, Forex trading has only recently begun to subject brokers to uniform standards.

The final essential element is trading capital.

The risk of losing money, either temporarily or permanently with FX trading, is very real.

It is vital, therefore, that any funds committed to Forex trading be money that can be lost without regret or impacting the trader's lifestyle. Anything less than this tends to lead to intense psychological pressure that will generate bad trading decisions.

You already know everything you need to know to trade in the currency market

On the surface, this may seem like a bold claim, but let's examine it more closely.

When someone goes out with the intent to purchase anything, they attempt to find the best acceptable quality for the lowest price. This is exactly what a Forex trader who wants to buy a particular currency pair is doing.

Just as that person might wait for a sale or use a coupon to lower the price of a purchase, a Forex trader will wait for prices to be low before buying.

Currency trading also permits the selling of currency pairs. In this instance, the trader waits for prices to be high before selling, knowing that the probability of prices going down is better.

So, anyone with the experience of stocking up on an item when the prices are low or doing without it when the price is perceived as being too high, had engaged in the sort of activity that precisely describes Forex trading.

What makes the entire process a little bit tricky is that even though currency prices are constantly going up and down, it is difficult to predict exactly when that is going to happen.

The timing of when to buy, sell or simply observe currency prices is the element that will require practice and the gaining of some experience.

Forex brokers all offer simulated trading accounts where new traders can practice trading in a real-time environment without risking actual money. These practice accounts are indispensable for learning how currency trading is actually conducted.

It should be remembered, however, that there is a substantial difference between practicing and the real thing.

Just as a basketball player practicing free throws experiences intense pressure when those free throws are taken with a real game on the line, Forex traders are likely to respond quite differently when it comes to the difference between pretend and real money.

Professional advice should be sought regarding all financial services. These can be obtained from financial advisors and planners who can also advise on financing, loans, accounting, bookkeeping and tax return filing.