In order to become successful in Forex trading one should understand what precisely this term denotes. From one hand, foreign exchange market (aka Forex) is the global de-centralized financial asset where people trade international currencies against one another.
It can be compared with stocks or commodity markets but, for sure, has its own peculiarities. For example, only Forex market determines the relative price terms of involved currencies. Considering the difference between bid/ask prices of a currency pair a trader can earn on the fluctuations within an exchange rate. Such scheme of trading is used only at Forex market.
From the other hand, this term stands for the whole process of online Forex trading. Such definitions make beginners confused. So, it is better to understand Forex, foremost, as the market where one can buy/sell a currency for another currency considering its exchange rate.
Forex trading market has a fluctuating nature letting trade currencies on a regular base. Few global FX financial centers working around the clock (except weekends) allow buyers and sellers benefit from online Forex trading.
All currencies have no fixed exchange rates. But only few of them are called as majors (aka “blue chips”) at Forex trading market. Most online Forex trading participants prefer to deal with four currency pairs:
- Euro currency is traded against U.S. Dollar (online Forex trading glossary marks this pair as EUR/USD);
- U.S. Dollar is traded against Japanese Yen (this pair is marked as USD/JPY);
- British Pound is traded against U.S. Dollar (marked as GBP/USD);
- U.S. Dollar is traded against Swiss Franc (USD/CHF).
There are about 12 major currency pairs and about a dozen of minor pairs used in online Forex trading. No matter what pair you personally will choose, the scheme of Forex trading is the same. You should forecast the fluctuations in exchange rates to “buy low and sell high”. All FX trading strategies are aimed at helping to predict such changes more accurately.
We got used to online Forex trading phenomenon but do not know a thing about its origins. To make it brief, let’s appeal to the most important staff and staple of Forex trading history:
- In 1875 Gold Standard Monetary System was created. Until all countries had used for international trading gold and silver in a quite chaotic manner. There were set the first regulations which formed the ground for future Forex trading.
- Creation of Bretton Woods System of global monetary management in 1944. After the abandonment of Gold Standard Monetary System this new system brought new formations. More or less fixed exchange rates for the major international currencies were set and U.S. Dollar became the prior reserve currency. In 1971 Richard Nixon officially “closed” the gold window. There were forbidden exchange transactions of gold for U.S. dollars kept in the international reserves. Bretton Woods System had assisted to build the base for Forex trading market.
- Since 1976 there have been launched legal 3 main “pure” exchange rates systems which are widely used nowadays as well. They are Dollarization, Pegged Rate System and Managed Floating Rates.
Without mentioned historical facts we would not be able to trade at Forex. Nowadays online Forex trading is one of the most reliable methods to earn money in a remote way. Surely, Forex market is not the “Holy Grail” as many beginners suppose. But its unique nature allows earning decent money for living. What makes Forex market so unique today? Few reasons can be named:
- Huge Forex trading volume. Comparing to other assets Forex market is the oldest one. Its daily turnover of transactions brings more than 4 trillion USD. Such huge volumes give the base for a high liquidity and volatility. These concrete terms make Forex market available for investors with modest deposit capitals.
- Forex trading geography. Four continents in all time zones have their own Forex financial centers. When one center closes a trader can join the ranks of other Forex trading markets’ participants.
- One can trade 24/5 without day-offs (except weekends and international holidays).Such disperse geography allows trading practically without pauses and breaks. Every trader is welcomed to trade from 20:00 (GMT) on Sunday till 22:00 (GMT) on Friday.
- Low fees and margins along with high leverage terms. Such flexible conditions bring more situations to profit comparing to other financial markets.
The enumerated advantages make Forex trading so popular among independent investors and governmental institutions. With the development of the internet and software one can choose to follow the path of online Forex trading. Automated online Forex trading is accessible now in every corner of the Earth.
As you see, Forex trading gives a number of opportunities. It is worth a shot to use them. According to the experts’ analysis and statistics, it stays one of the most beneficial types of investment. If one is able to cope with emotions and risk management he or she will get a stable source of income.
How can you earn money with online Forex trading? In fact you can follow two ways. The first one is called managed accounts trading. And the second is all about developing your own strategy to succeed in speculating currencies.
At first, let’s focus on managed accounts. This solution of Forex trading has its benefits. Most beginners like an idea of trusting their money to experts who could multiple deposits. It means you can control your trading account. But another person makes all deals instead of you, on your behalf. Such strategy saves time and consequently money. A beginner who selects to trade at Forex with the help of more professional traders can avoid educational issues, at least. However, such approach leads to another problem instead. How to find a reliable broker and then manager to trust him or her real money deposit? The choice of a broker also leads to education and researches. But in fact it is like “getting off with a scratch”. So, consider the possibility of managed Forex trading as the alternative to unassisted FX trading.
Surely, a certain percentage of beginners want to control everything on their own. That is why they choose self-reliant FX trading methods. This way is harder to follow, especially for a newcomer. But if you are a persistent enough and ready to spend a lot of time for preparation, you are welcomed to try. Theoretical education is necessary as well as practicing of any chosen strategy via a demo account.
Every online Forex trading broker can offer you to open a demo account. It should be accepted as the simulator of real trading but with virtual money. Many beginners think that real trading is as easy as demo account shows. But in fact emotions and wrong strategy can leave a newbie with nothing. Risk and money management can be learnt only in the process of live Forex trading. And with this purpose micro and mini accounts are offered by brokers. Unlikely full trading accounts where one should deposit 1000 USD at last, mini accounts let risking only 25 bucks or even smaller. For beginners, it is an additional way to practice in earning real money before setting sail for higher profits.
Forex trading offers multiple opportunities. In fact it doesn’t matter what kind of way you will choose to follow. There will be pros and cons, failures and successes. To cope with doubts bear in mind one wise saying concerning Forex trading: “Difference between Winners and Losers is Persistence”.